October 1996 |
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In This Issue
Contractors Prevail Over School BoardIn a hotly contested dispute arising over the settlement of the Tolles Technical Center's expansion in Madison County, the School District Owner sued the Contractor, Peterson Construction, and excavation Subcontractor, George Igel & Co., alleging that the construction team had failed to remove all of the organic soils under the building to full depth. The contractors countered that they had fully performed the work according to the specifications and that the Soils Engineer retained by the Owner, Dunbar, was responsible for any errors concerning the identification and removal of organic soils. This situation was complicated by the fact that the School District's contract contained disclaimers purporting to disclaim any liability for the subsurface reports or the actions of the soils engineer. After a two week trial before Madison County jurors, all of whom were taxpayers in the School District, the jury agreed with the Contractors' position that they had fully complied with their contract and subcontract obligations respectively, threw out the school's claim in excess of $1 million and awarded the Contractors more than $323,000 in excess costs advanced by them to help repair the building. "No Damage for Delay" Decision ReversedAs reported in a previous issue (May, 1996), Judge Watson of the Franklin County Common Pleas Court threw out a contractor's delay claim against the Reynoldsburg Schools, on summary judgment, due to a "no damage for delay" provision, even though the contractor had argued that the delays were not foreseeable at the time of contracting. The matter was appealed and an amicus brief filed by AGC-Ohio in support of the contractor's position. On June 23, 1996, the Franklin County Court of Appeals reversed Judge Watson's decision by ruling that the trial Court must determine the extent and magnitude of the accumulation of delay and whether or not this was foreseeable, before determining whether a "no damage for delay" provision is enforceable. This appellate decision is consistent with other Ohio law on the subject and gives contractors and subcontractors an argument as to why a "no damage for delay" provision should not bar their delay claim. However, the best defense to a "no damage for delay" provision is to refuse to bid such work or sign such a contract, or in the alternative, to pass legislation making these provisions void as against public policy. Senate Passes Fairness in Construction Contracting BillAfter extensive discussion, negotiation and drafting, the general contractors of the State represented by AGC-Ohio and the subcontractors represented by the Ohio Subcontractors Council (ASA) have reached a compromise and consensus industry bill-Sub. S.B. 106. The legislation is designed to remedy certain inequities in construction contracting created by adverse court decisions or unfair practices within the industry and contains the following elements:
These provisions should cause a more equitable sharing of risk in the construction process rather than simply shift all risk to the party least able to manage or control that risk, and as a result create a fairer and more competitive construction marketplace, ultimately benefiting all Ohioans. The bill passed by a 32-1 margin in the Senate on May 28, 1996 and is now pending in the House of Representatives. Columbus Set-Aside Policy Ruled Unconstitutional AgainJudge Graham of the U.S. District Court, Southern District of Ohio, has recently ruled in a 237 page opinion that the City of Columbus did not follow a pattern of discrimination in its minority contracting and therefore its minority contracting set-aside policy is unconstitutional. The City's policy had adopted goals of 10% for minority owned businesses and 7% for women owned businesses. Under the U.S. Supreme Court case of City of Richmond v. J.A. Croson Co., governments attempting to implement set-aside programs must prove that discrimination occurred by that governmental body. Judge Graham ruled the City of Columbus was unable to prove that such discrimination against minority and female contractors occurred by the City of Columbus. It is uncertain at this point whether the City will appeal. Supplier May Be Sued by HomeownerSubcontractors and suppliers suffered a legal setback when the Ohio Supreme Court ruled in the case of LaPuma v. Collinwood Concrete, 75 Ohio St.3d 64 (1996), that a homeowner could still sue a concrete supplier directly despite having no contract with the supplier. In that case, the homeowner complained that the driveway was the wrong color and sued the supplier in tort for a breach of the implied warranty of workmanship. Despite having no contract directly with the homeowner, the Ohio Supreme Court held that the supplier could be sued directly for damages to the product itself, here the concrete driveway. This means that subcontractors, suppliers and other providers of construction services, without privity of contract with the owner, will be increasingly targets for lawsuits when the contractor is irresponsible or uncollectible. Project Labor Agreement UpheldThe Jefferson County Court of Appeals ruled that a mandatory project labor agreement, which imposed uniform procedures for dealing with labor disputes and working conditions did not violate the public bidding statutes or the state equal protection clause where no bidder was prevented from submitting a bid and there was allegedly no distinction between union and nonunion contractors. State ex rel. ABC v. Jefferson Cty. Bd. (1995), 106 Ohio App. 3d 176. Contractor May Be Liable to Sub's Employees for Prevailing WagesThe Franklin County Court of Appeals in the case of Connell v. Wayne Builders, Case No. 95APE07-897, has ruled that a subcontractor's employees, as third party beneficiaries to the prime contract requiring the general contractor and all subcontractors to pay prevailing wages, may sue a general contractor to recover unpaid wages after the state has determined that a violation of the wage and hour laws has occurred. Firm NewsPatrick O'Neill, who has worked in the construction industry, has joined the firm to work exclusively in the Construction Law area. Don Gregory successfully represented Igel in the Tolles case and helped draft and pass Sub. S.B. 106 on behalf of ASA. Ron Mason argued the Jefferson County project agreement case for ABC. Mike Galeano has been named as a director of the firm. CreditsKegler, Brown, Hill & Ritter's Construction Law Newsletter is prepared by Donald W. Gregory for the Construction Law practice group. To subscribe to any Kegler Brown publication, please use our Subscribe Form. To unsubscribe from any Kegler Brown publication, please use our Opt-Out Form. This publication, as well as an archive of previous publications, is also available from our Publications Archive. The Construction Law Newsletter is designed to provide general information about the subjects discussed. It is not meant to be all-inclusive or comprehensive. Kegler Brown is not rendering any legal or professional advice by way of this publication. © 1989-2008, Kegler, Brown, Hill & Ritter Co., L.P.A.
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