Top 3 Legal Developments of 2016

Kegler Brown Construction Newsletter

1. The Supreme Court of Ohio Issues the Landmark Case on Liquidated Damages

In a case lawyered by our own Eric Travers, the Ohio Supreme Court in the Boone Coleman case upheld a liquidated damages clause that assessed over a year’s worth of liquidated damages. In assessing the reasonableness of such a high figure, the Supreme Court determined that you needed to look at the reasonableness of the liquidated damages at the time the contract was entered into, not retroactively at the time of the breach. The Supreme Court ruled that any other interpretation would “relieve a breaching party of consequences it agreed to by refusing to enforce a per-diem liquidated damages provision solely because the breach was an egregious one.”

2. The Court of Claims Finds for Contractors Who Give Notice

The Court of Claims ruled on the delay claims of electrical contractors on public projects – with far different results. In the Accurate Electric case, the court found that notice given after the contractor was already “off the project” was insufficient to preserve the claim. In contrast, the same judge ruled in the Wood Electric case – handled by our firm – that the notice provided by the electrical contractor was sufficient and allowed the contractor to recover 100% of its claim, including extended home office overhead. Prompt notice matters.

3. Local Residency Requirements in Limbo

The Ohio legislature passed, and Governor Kasich signed, H.B. 180, a law that was supposed to go into effect on August 31, 2016, and would ban public entities from insisting on local residency requirements when procuring construction services. The law would have prohibited local ordinances like Cleveland’s “Fannie Lewis law,” which requires that 20% of construction hours on Cleveland projects be performed by Cleveland residents.

However, the City of Cleveland filed for – and received – an injunction preventing the State of Ohio from implementing the law until the case could be heard on its merits. Therefore, contractors have no choice but to adhere to local residency requirements until the legality and constitutionality of H.B. 180 is firmly upheld by the courts.