September 12, 2016
HRKM Attorney’s Winning Verdict in Asian Antiques Case
Chris Hill recently won a jury trial in a commercial litigation case for a local antiques dealer. HRKM filed suit on behalf of a family-owned Winter Park company, seeking to collect more than $1 million from purchasers located in Chicago. The Chicago buyers had purchased hundreds of Asian antiques, but had failed to pay for many of them and refused to return other items that were part of a cancelled sale. HRKM filed an action for breach of contract seeking payment of the amounts owed. A claim for civil theft was added after the purchasers actually sold one of the items to be returned at an international art auction house. Civil theft is a cause of action in Florida under Sec. 772.11(1) that allows a plaintiff to recover treble damages in the event the defendant commits an act amounting to a theft under Florida’s criminal statutes. The claim also allows for the prevailing party to recover its attorneys’ fees. The purchasers also counterclaimed, asserting actions for fraud, negligent misrepresentation, breach of warranty and violation of the Florida Deceptive and Unfair Trade Practices Act per Sec. 502.201 Fla. Stat. et seq. (“FDUPTA”). The purchasers claimed that seven of the items they purchased were not authentic and were actually 20th century reproductions. FDUTPA provides in Sec. 501.204 that “Unfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful.” This Act covers a broad range of unfair practices, from deceptive advertising, to usury, to unlicensed contracting. FDUTPA was designed as a consumer protection law. But in 2001, the Legislature amended the statute to allow businesses to sue for unfair trade practices, opening up a new weapon in commercial disputes. Like civil theft, FDUTPA can be a powerful tool because it awards attorneys’ fees to the successful party. However, it also carries serious risk, because a successful defendant can recover attorneys’ fees from the plaintiff. The case was tried to a jury over 4 days. Each side presented expert testimony on the validity, provenance and authenticity of the challenged antiques. After retiring for approximately 15 minutes, the jury returned with three questions: 1) could they award HRKM’s client more than it requested?; 2) could they award HRKM’s client interest in addition to damages?; and, 3) if so, did they need to compute the interest? Shortly after those questions were answered by the Court, the jury returned a verdict in favor of HRKM’s client on all claims. In fact, the jury did award more on the primary claims than HRKM’s client had requested, found that the purchaser had committed a civil theft and found no liability on any of the counterclaims asserted by the purchasers. The Court has also awarded attorneys’ fees in favor of HRKM’s client under the civil theft claim, the FDUTPA claim and several proposals for settlement. The claim is now on appeal and the purchaser has posted an appellate bond in the amount of $1.9 million.
August 24, 2016
Aerial Photos Provide Inexpensive and Compelling Evidence
HRKM lawyers used aerial photography taken over time in a recent trial to prove that a property had numerous gaps in a fence line which the plaintiff claimed was secure. In the above photo from property appraiser’s public records, one can see an open dirt roadway through a gap where a barely visible chain link fence ends. We offered photos like this into evidence to show that vandals could easily access the property. While people are familiar with sources like Google Maps, there are many other inexpensive sources of historical images of property, such as county property appraiser’s records (now available online in many counties), USDA photos, construction project progress photos, and commercial services that routinely photograph areas and hold the photos for future sale. Photos like these provide perspective, and filling gaps and errors in memory. They’re an important tool for a trial lawyer or real estate lawyer to resolve doubts and shut down unnecessary arguments.
August 15, 2016
HRKM Staff Attends Popular Networking Event in Orlando
Partner, Ric Keller and staff of HRKM had the privilege of attending TCU Construction’s Networking Event at Bar Louie last Thursday. Our staff had an amazing time meeting everyone who participated in this occasion!
August 3, 2016
HRKM Lawyers Recover Costs From Plaintiff After Dismissal of Warehouse Fire Case
Chris Hill and Andy Showen secured a judgment of dismissal at the close of plaintiff’s case in a Federal court trial in Orlando in December 2015. The court taxed defense costs against the plaintiff of over $17,000 in post-trial proceedings, which the plaintiff then paid to HRKM’s client’s insurer. The plaintiff, a developer, had purchased land near the SR 429 expressway, where HRKM’s client had performed construction work, and contracted with the developer to use a well and remove fill dirt. A late night fire of unknown original burned down an abandoned agricultural warehouse on the property. The plaintiff alleged HRKM’s client was negligent in removing a fence near property. The plaintiff also alleged the parking of construction equipment on the property created an attractive nuisance, and the contract required the builder to indemnify the developer. The court entered summary judgment before trial on the attractive nuisance claim. The court also entered partial summary judgment against the indemnity claim, finding that the indemnity from “claims” did not require the builder to indemnify from a fire, when no third party presented a claim against the developer. At the conclusion of the plaintiff’s case, Hill and Showen presented an unusual Rule 52(c) motion for dismissal. The court granted the motion, holding that the builder’s right to enter the property to obtain water and fill dirt did not give it sufficient control of the property to impose a duty to protect the developer from actions of intruders. The insurer defending the builder recovered defense costs of over $17,000, paid by the plaintiff.
July 19, 2016
Can Legal Draftsmanship Fix The Florida Constitution Statute of Repose Problem?
We often hear that Florida has a ten year statute of repose for claims arising out of construction. Contractors design their risk management plans (such as they are) assuming there is an absolute ten year bar against lawsuits. But the ten year respose period was never quite so clear, and less so since May 2015. In Cypress Fairway Condominium Ass’n, Inc. v. Bergeron Constr. Co., 164 So. 3d 706 (Fla. 5th DCA 2015), the court reversed an orange County Circuit Court summary judgment for a subcontractor on a 2001 condominium project, leaving the subcontractor to face a $15 million damages claim.  For an explanation of the difference between a statute of limitation and a statute of repose, e mail us. The subcontractor’s repose argument made common sense. The sub presented its last pay application on January 31, 2001. Sec. 95.11(3)(c), the statute of repose for construction claims, says no claim may be brought more than ten years after “completion of the contract.” The sub argued its contract was “complete” not later than its final pay app. The circuit court agreed and granted the summary judgment, which was reversed by the court of appeal. The court of appeal held that because a contract is a set of promises with (at least) two sides – a contractor who does work, and an owner or general contractor that pays money – the contract is not “complete” until the last performance due from either party has occurred. Normally, that last performance is paying the money, not doing the work. I participated in the Cypress Fairway case representing another subcontractor and was at the circuit court hearings on this issue. Many fine lawyers made the common sense arguments to the circuit judge about why “completion of the contract” meant “completion of the job,” not “making the last payment.” If the repose period starts to run from final payment, then the owner can keep the contractor, architect and subs on the hook for claims forever, by simply failing to pay one penny of their final payments. Or, a bumbling contractor can deprive itself, and its subs, of the statute of repose, by failing to, say, deliver 3 full sets of as built drawings to the owner, if that is part of its promise to perform. The circuit court judge (wisely, in my opinion) agreed that using “completion of the contract” to mean “finishing the job, finishing the project,” was more consistent with the Legislature’s purpose in passing the statute of repose – protecting contractors from stale claims. She made a gutsy and common sense ruling finding that, in the construction business, “the contract” can have two meanings — “the bundle of rights” or “the project” — and that the Legislature had to have meant “the project”, and upheld the statute of repose defense. The court of appeal disagreed, and held “completion of the contract” doesn’t happen until the last penny is paid, and, implicitly, the last as built drawing and warranty is delivered — or whatever else the contract requires. Other courts have limited the value of the statute of repose to contractors. In Allan & Conrad, Inc. v. Univ. of Cent. Fla., 961 So. 2d 1083 (Fla. 5th DCA 2007), the 5th DCA held that, regardless of who is being sued, the ten year period does not start to run for anyone until it starts to run for the last to complete the work of the “professional engineer, registered architect, or licensed contractor and his employer, whichever date is latest.” (e.s.) Therefore, the site clearing subcontractor’s or engineer-surveyor’s statute of repose does not run out until ten years after the owner pays the GC. This could be months or years after the sitework sub or surveyor finishes its work. There is no short term prospect for a legislative fix. So is this a problem which the parties can draft a contract to fix? Possibly. It’s worth a try, in an increasingly litigious environment, where some are starting to think the statute of repose is an old dog that no longer hunts. There is a statute, Sec. 95.03 Fla. Stat., passed in 1975, which prohibits any contract clause shortening the statute of limitations for the contracting parties. At first glance, that would seem tp preclude drafting a contract clause to address the repose problem. However, many cases have explained that a statute of limitations is different from a statute of repose. The 1975 law changed the Florida common law, which permitted contracts to shorten the limitation period. There are a number of arguments that Sec. 95.03 does not, by its plain language, prohibit a contractual limitation on the statute of repose. One approach might be for the parties to agree that, notwithstanding matters such as payment or delivery of documents or approvals, the contract for construction is deemed “complete” when the project architect signs a certificate of substantial completion, or when a certificate of occupancy is issued, or some other neutral, objective event. This isn’t an agreement to shorten the statute of repose; it’s simply an agreement to define, by contract, what events “matter” for purposes of calculating the start date. The starting point is analyzing who stands to benefit. Is this an owner-occupied property? Then it’s a straight conflict of awareness and bargaining power between owner and GC. If the GC asks, will the owner notice, or care, or ask for a concession? If a sub asks a GC for custom language, the questions are the same. A sub initiating a request for this change in its subcontract may trigger the GC to ask the owner for the same. Is it a project the owner is selling or leasing? Then the owner and construction team have a common interest in working toward a true ten year statute to protect the whole team. The clause defining “completion” would need to be placed in the unit sales contracts or leases. This won’t happen unless the owner and construction team act with foresight to get the language into the contracts early, before the first sale or lease. A clause defining what “completion” means will not bind anyone who doesn’t sign the contract (like a slip and fall plaintiff). It may not defeat a statutory condominium warranty claim even if the unit owner signs an agreement saying his contract is complete when he gets a certificate of occupancy. However, for parties in a contractual chain of a project, it may give a fighting chance in the fact of arguments that the statute has never started to run because the GC failed to deliver extra AC filters and attic stock tile to the owner.
April 7, 2016
“What Do You Mean We Have To Go To Pennsylvania To Enforce Our Warranty?”: Roof Replacement, Venue Clauses, Warranty Limitations, And Other Pitfalls In Condominium Repair Contracts
The Life and Death of a Roof: A condominium building with a low-slope roof (commonly but incorrectly referred to as a “flat” roof) will need a reroof every seven to twenty years. This is a major budget item that can cost from $8 to $15 per square foot of roof deck, which quickly adds up to hundreds of thousands of dollars on a typical Florida condominium building. Roofing is one of the largest investments a condominium association will ever make. If the results are a faulty roof, the decisions made can quickly become the biggest source of grief a condominium board will ever face. Your Warranty – Will Anyone Answer the Phone? One benefit of a reroof project is the warranty from the manufacturer and roof installer. But manufacturer’s roof warranties (and often, other vendor contracts) contain unpleasant fine print surprises. All warranties are not created equal, and an effective Board must look far into the details of the warranty document, far beyond the number of years promised, and who is making what promises. When shopping for roofing contractors you will hear flowery terms like “master contractor” and “elite contractor,” or “non-prorated warranty pledge” and “lifetime warranty.” None of these marketing terms mean anything if something goes wrong with your expensive new roof. All that will matter is the legal language in the contract and warranty. The legal entities that are the roofing installer’s corporation or LLC can be (and often are) quickly dissolved and reformed at the convenience of the roofer, resetting their past liabilities to zero. For this reason and many others, a roofing installer’s warranty is typically not as valuable as the roofing manufacturer’s warranty. The Fine Print May Be Where The Money Is: One of those surprises could require your association to hire a lawyer in Pennsylvania, or go before a judge and jury in Michigan, to enforce the warranty to pay for a roof leak in your Florida building. Chasing a roofing contractor or manufacturer back to their home state for a lawsuit after they fail to meet warranty obligations can be prohibitively expensive. Many major roofing contractors and manufacturers include clauses in their warranties that would require your Florida association to bring any lawsuit to enforce the warranty in the manufacturer’s home state. One author of this article has recently testified as an expert witness in a lawsuit brought by a Florida condominium over a roof warranty dispute. The association was forced to hire a lawyer in Pennsylvania to prosecute the case in the manufacturer’s home county in Pennsylvania. Hiring a second and remote lawyer necessarily costs the association a great deal more money. Many lawyers would agree that a Florida condominium association suing a manufacturer in its home town may face a further problem of jury bias in favor of the “home town” company. Conversely, the association would have greater negotiating leverage if the manufacturer faced the costs of hiring a Florida lawyer to defend its product before a Florida jury from the association’s home county. The manner in which the litigation venue is typically specified by the roofing companies is no accident. It’s important for the association, when signing any contract with a vendor or service provider, to carefully read all of the vendor’s contract. The “fine print” or “boilerplate” (usually the final few paragraphs or back side of the contract) contain clauses that shift the advantage to the vendor if there’s a dispute about performance or a lawsuit. The co-author’s lawsuit involved a clause that read: “Any disputes or actions relating to or arising out of the work to be performed pursuant to this Sales Agreement shall be exclusively governed by the laws of the Commonwealth of Pennsylvania. Jurisdiction and venue of any action proceeding out of relating to the Agreement shall be vested in the courts in Washington County, Pennsylvania. (e.s.) Purchaser irrevocably waives any objections it now has or may hereafter have to the convenience or propriety of this venue….. To be valid, any changes to the Warranty must specifically approved in by Corporate Officer of manufacturer” Florida courts will enforce these “venue clauses” and “choice of law clauses”. Usually, paying a lawyer to challenge such a clause is money wasted. The time for the association to win the venue fight is before the contract is signed. The association’s representative should read all bids and contracts with care to make sure it doesn’t contain references to “venue,” “actions,” or “jurisdiction” in other states, or refer to the law of a state other than Florida. The bigger picture is that a contract that is difficult or costly to enforce is a ghost of a contract. If a vendor makes it too expensive to legally enforce a contract, it can walk away from the promise and get away with it. (Economists and lawyers call this “transaction cost,” and transaction costs are one of the biggest overlooked issues in legal disputes. In simplest terms, let’s not spend a dollar to recoup fifty cents. Venue clauses are designed to make the buyer spend a dollar to recover the fifty cents.) Suggestions For The Battle Of The Fine Print: Cross Out The Language And Have The Change Initialed. Buyers shouldn’t hesitate to strike out unacceptable language in a contract before the salesman closes the sale. This is when you have the negotiating leverage — not after a roof or other problem manifests. We mean, literally, take a pen and strike through the language, so it looks like this: Any disputes or actions relating to or arising out of the work to be performed pursuant to this Sales Agreement shall be exclusively governed by the laws of the Commonwealth of Pennsylvania. Jurisdiction and venue of any action proceeding out of relating to the Agreement shall be vested in the or courts in Washington County, Pennsylvania. Purchaser irrevocably waives any objections it now has or may hereafter have to the convenience or propriety of this venue….. To be valid, any changes to the Warranty must specifically approved in by Corporate Officer of manufacturer. [YOUR INITIALS][SELLER’S INTIALS][MANUFACTURER’S INITIALS] This may or may not work. The salesman may protest, pretend to walk away, or really walk away and take his company out of the game. This suggestion applies to any contract — from a reroof to buying bottled water to lawn service. As with most negotiations, the party who needs the deal more typically backs down. If your association has asked for competitive bids for the project — as suggested below — it should have a few vendors to choose from. This should give your association leverage. The manufacturer whose clause we quote above anticipates this move by requiring any warranty changes to be approved by a “corporate officer.” The association would need to secure the signature of the manufacturer’s corporate officer to make the strikethrough and deletion stick. Competitive Proposals. A major project (such as a reroof, a balcony restoration, or a cathodic protection system) should start with an invitation to competitive bids, in writing, with written specifications prepared by a design professional. The invitation to bid and specifications can contain your own version of the venue and choice of law provision, and other useful legal tools beyond the scope of this article. These may conflict with language in the vendor’s boilerplate. However, the courts will typically hold that language created for a specific transaction will control over general “boilerplate” used by the seller for all its transactions. It’s important to remember the roofing installer and the roof material manufacturer are two different legal entities. The contract between the association and the roofing contractor may not necessarily be legally binding on the materials manufacturer. In fact, without careful draftsmanship, it probably won’t be. A warranty is only as good as the ability of the vendor it to stay in business, provide the repairs, or pay claims. This is one reason the manufacturer’s warranty has value. A local roofer may go out of business or lack the money to pay a judgment; the manufacturer is likely to have a deeper pocket. Like two parachutes, two warranties are better than one. The goal should be to have both the installer and the manufacturer provide separate warranties. Andrew Showen is a board certified construction lawyer with Hill Rugh Keller & Main, Orlando, Florida, 407-926-7460 (email@example.com). Sean Burlingham, P.E., 321-693-2049 (firstname.lastname@example.org) is an engineer practicing in Brevard County and across the state of Florida with expertise in concrete buildings and condominiums. This article is not legal or engineering advice and does not create a client relationship.
Performance Bonds , Indemnity Agreements and Contractor’s Spouses
Building contractors often have to provide performance bonds to owners. Do their spouses understand they are cosigning for those bonds and may lose their homes and personal assets when obtaining the bond? Contractors’ spouses’ risk on bonded projects You may have heard of the problem of a spouse who gets stuck with a tax liability for unpaid taxes or an incorrect or false tax return. Here’s a similar problem for innocent, or at least uninformed, spouses, who are married to contractors. I’m a board certified construction lawyer, and I’m saddened to see spouses learning for the first time, at the end of a project, that they are jointly and severally, personally liable for claims arising out of construction projects. How It Happens It starts when your husband or wife owns a construction company. On a big job, or a public job, the owner may require a payment or performance bond to guarantee the contractor’s work. The bond is a promise by a financially responsible institution to guarantee that if the builder fails to perform, the bonding company will pay the owner for the cost to complete the job (subject to many caveats). The company that issues the bond, called the “surety”, charges the builder a premium for the bond, just like insurance. Unlike most insurance, the surety will also usually require the individual owners of the builder to sign an “indemnity agreement.” The agreement means that if the surety has to pay the owner, the surety can collect whatever it paid from the builder, individually. This is true regardless of whether the builder is a corporation. The entire point of the indemnity agreement is to (lawfully) defeat the defense that the company’s owners are not individually liable. How does this affect the builder’s spouse? Of course, individuals have defenses too, and sureties have been around the block a few thousand times. They know that an individual owner of a contracting company, if married, would claim his or her assets are marital property, and marital property is typically not liable for one spouse’s business debts. The fix: the surety insists that the contractor’s spouse co-sign the indemnity agreement. This results in the spouse being jointly liable with the company-owning spouse for the duty to repay the surety, if the surety ever has to pay the owner for a breach by the contractor. (That’s a long and complex sentence, but it’s the key issue: if owner collects from surety, surety collects from family of the owners of contracting company). The owner’s claim against the surety may be for hundreds of thousands or millions of dollars, and will typically include the bonding company’s attorneys’ fees. The surety also typically gets to recover its attorneys’ fees from the construction company owners. This exposure may present financial ruin for the builder’s spouse and family. What to look out for There is nothing dishonest or illegal about this chain of events. It is simply an intelligent way to structure a transaction from the surety’s viewpoint. However I suspect it presents a huge and nasty surprise to a lot of spouses who have no involvement in the contracting company’s business, have no idea that the company or a job is in trouble, and discover to their dismay that their comfortable lives have just been financially ruined. I attended a mediation recently where the contractor (call it Smith & Jones Construction) had million dollar problems on a job, maybe or maybe not the builder’s fault. Regardless the attorneys’ fees were in six figures to defend the surety. The builder was bankrupt; the builder’s insurance company denied coverage; the surety litigated the case for three years; and I suspect there was a very hard negotiation among the insurer, the surety and Mrs. Smith and Mrs. Jones’ lawyers over how much of the low 7 figure tab each was going to pay. The starting point for the problem, and the red flag, should have been when Mrs, Smith and Mrs. Jones were asked, probably by their spouses, to sign an “indemnity agreement.” Maybe they read and understood it; maybe, like many documents passed between spouses, they just signed it. For a contractor’s spouse, being asked to sign an indemnity agreement should be a red flag event like signing a tax return or cosigning a bank loan or equipment lease. It means that the defenses that the individual shareholders aren’t liable for company debts, and marital property isn’t reachable to pay the spouse’s individual debts, are out the window. Why would anyone sign such an agreement? What’s the fix? The problem for the spouse is , without the indemnity agreement, there will be no bond; without a bond, the contractor doesn’t get the job; without the job, the family doesn’t eat. I think every spouse of a contractor who does bonded work ought to think carefully about whether getting bonded work is worth the risk; and alternatively, consult with a very well qualified asset protection lawyer to get advice on how to structure the family’s property ownership, in a legal way, to trump the surety’s ability to pursue martial assets.