Photo of Scott T. Earle

Scott T. Earle is a Senior Associate at Cohen Seglias and a member of the Firm’s Commercial Litigation, Construction, and Financial Services Groups. Scott practices all aspects of civil and commercial litigation, concentrating on construction, asbestos defense and bankruptcy litigation before state and federal courts, as well as arbitration forums in the jurisdictions where he is admitted.

In some states, courts allow contractors to sue design professionals for negligence even in the absence of a contract. In others, like Maryland, courts apply a rule known as the Economic Loss Rule (ELR) to bar such claims. Courts apply the ELR when, without a contract in place, someone sues another for purely financial losses (i.e., not for personal injuries or property damage). The ELR is very important in the construction world because contractors who sustain losses that they attribute to substandard design documents often sue the design professional who prepared the plans and specifications, even though they rarely have a contract with the designer.

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In a recent case – Balfour Beatty Infrastructure, Inc. v. Rummel Klepper & Kahl, LLP – the Maryland Court of Special Appeals (“Court”) reaffirmed the ELR and rejected various claims brought by a contractor against a design professional. The Balfour Beatty Infrastructure case involved a public works project for the City of Baltimore (“City”). The City entered into contracts with the design and engineering firm Rummel Klepper & Kahl, LLP (“RK & K”) to upgrade a water treatment plant. The City also entered into a contract with Balfour Beatty Infrastructure, Inc. (“Balfour”) to build the upgrades. Balfour did not have a contract with RK & K. Due to a series of design errors, Balfour suffered delays during construction and performed additional work that it attributed to the design errors. Based on these facts, Balfour sued RK & K for professional negligence and negligent misrepresentation, alleging that RK & K supplied false information to prospective bidders and failed to establish a  reasonable contract duration.

Continue Reading Can a Contractor Sue a Design Professional Without a Contract? Not in Maryland

By: Scott T. Earle and Jennifer M. Horn

The recently passed and amended Delaware House Bill 109 (“HB 109”) has important implications for anyone concerned with construction law in Delaware. According to amended HB 109, any provision in a contract for construction occurring in the State of Delaware is void and unenforceable as a matter of law (1) if it requires that a dispute arising out of a Delaware construction project be subject to any law other than Delaware law, or (2) if it requires that a dispute related to a Delaware construction project be litigated outside of the State of Delaware.

The Law and Its Effect

HB 109 makes any contract provision requiring a dispute arising out of a Delaware construction project to be litigated outside of Delaware unenforceable as a matter of law. This is good news for Delaware based contractors who wish to keep their construction disputes in Delaware (regardless of what their contracts may or may not provide on the issue); bad news for companies who have contract clauses requiring that conflict resolution take place in another State. In addition, HB 109 voids construction contract provisions relating to choice of law in that any law other than Delaware’s is inapplicable, despite contractual agreements to the contrary.

Its History

After stalling out in the Delaware Senate Executive Committee during the last legislative session, the Delaware State Senate introduced Senate Amendment No. 1 (“SA 1”) to HB 109 to the floor this last legislative session. SA 1 maintained the original “Building Construction Procedures Act” (the “Act”) by striking Sections 1 and 2 of HB 109 in their entirety and amending Section 3507 of the Act. After being passed by both the Senate and House of Representatives in June, HB 109, as amended by SA 1, was signed into law by Governor Markell on June 25, 2012.

The Net Effect?

The net effect of HB 109 is to be determined. In this regard, contractors and subcontractors alike should re-visit and understand the choice of law and venue provisions of their construction contracts. The newly amended HB 109 will, among other things, preclude out-of-state construction firms from forcing Delaware based firms to incur the additional litigation costs associated with litigating outside of the State. Also, the choice-of-law aspects of HB 109 provide certainty to Delaware contractors, suppliers and subcontractors accustomed to the nuances of Delaware law.

Scott T. Earle is a Senior Associate with Cohen Seglias and a member of the Business Transactions Group.

Jennifer M. Horn is Senior Counsel at Cohen Seglias and a member of the Construction Group. She concentrates her practice in the areas of construction litigation and real estate.

By: Scott T. Earle House Bill 109 (HB 109), which was passed by the House of Representatives, has stalled out in the Senate. This Bill was a proposed amendment to Title 6, Chapter 35 of the Delaware Code Delaware2.jpgBuilding and Construction Payments section (the Act).

What Would HB 109 Have Changed?

HB 109 would have changed the name of the Act to the “Building Construction Procedures Act” and expanded the scope of the Act to apply to all forms of construction, not just construction related to buildings or structures. The amendment would have also made it against public policy to apply any other law but Delaware law to construction contracts performed in the state. It also would have required an in-state contractor to participate in any legal proceedings inside the State of Delaware. Additionally, HB 109 would have consolidated and amended the contract clauses currently contained in Sections 3506 and 3507 into one section to harmonize the timing of events set forth in these Sections, which are presently inconsistent. Finally, the amendment would have also changed the time in which a contractor or subcontractor has to dispute an invoice from 7 days to 15 days.

Next Steps for HB 109

HB 109 was passed by the House on June 22, 2011 and received no opposition. The amendment was passed with forty out of a possible forty-one votes in its favor. After being passed by the House, the amendment was introduced to the Senate on June 23, 2011 where it stalled out in the Executive Committee and expired when the General Assembly recessed on June 30, 2011. HB 109 is anticipated to be reintroduced next January when the General Assembly reconvenes. We will monitor HB 109 and update you when the General Assemble reviews the legislation. Scott T. Earle is a Senior Associate with Cohen Seglias and a member of the Business Transactions Group.