Photo of Tony Byler

Anthony L. Byler is a Partner and a member of the Firm's Construction Group. As a trial lawyer, he focuses his practice on representing public and private owners, contractors, subcontractors and material men. Tony has handled major construction disputes, for both plaintiffs and defendants, involving educational facilities, hotels, bridges, high-rise residential buildings, prisons, waste water treatment plants, parking garages, docks, assisted living facilities and shopping centers.

A frequent author and speaker on construction industry topics, Tony has written for Construction Today Magazine and has given numerous construction law seminars for the National Electrical Contractors Association, the General Building Contractors Association, the National Demolition Association and Widener University.

Arbitration has become a very common and effective way to resolve construction disputes in lieu of traditional litigation, and it is easy to understand why:

  • The parties can select arbitrators with construction expertise who speak their language and are more likely to understand complex construction issues than a general court of law.
  • Arbitrations are characteristically speedier from inception to award.
  • Discovery (the parties’ exchange of information and taking of depositions) is often more truncated and can, therefore, be less costly.
  • Arbitrator awards are typically binding and not normally subject to an appeals process that tends to add more time and cost to the outcome.

We would be remiss, however, if we did not mention that arbitration is not for everyone.  Parties are often required to pay filing and other administrative fees that are considerably more expensive than the cost of court filings, and they must also pay the arbitrators, who typically bill by the hour (feel free to insert your own generic lawyer joke here).  In the construction context, we find that owners, developers, and public entities often will elect litigation over arbitration.

The finality of the award cannot be overstated.  This article about a recent federal court decision – in which a party discovered after the award that one of the arbitrators failed to disclose a number of serious charges that included the unauthorized practice of law – drives the point home.  Under the Federal Arbitration Act, courts may only vacate an arbitration award under very limited and extreme circumstances:

  • the award was obtained by corruption, fraud, or undue means;
  • there was evident partiality or corruption in any of the arbitrators;
  • the arbitrators were guilty of misconduct for refusing to hear evidence relevant and material to the dispute; or
  • the arbitrators exceeded or imperfectly executed their powers.

In other words, a court will not disrupt an arbitration award simply because the arbitrators may have “gotten it wrong.”

It can be strange and counterintuitive to think about how a dispute should be resolved when signing a contract.  Most parties to a construction contract are, understandably, thinking about the excitement of starting a new project, how to build the project cooperatively and safely, and how to manage it in a way that will be profitable to the companies involved.  It is nonetheless important to think about dispute resolution while negotiating your construction contract.  This is so because the decision to arbitrate or litigate is often one that is made within the contract document itself rather than by the election of the parties after the dispute has arisen.  If a dispute develops, the language of the contract will have important implications for how your dispute is decided, who will decide it, and how much time and money it will cost to resolve.

Tony Byler is a Partner at Cohen Seglias Pallas Greenhall & Furman PC and a member of the Construction Group. As a trial lawyer, he focuses his practice on representing public and private owners, contractors, subcontractors and material men. Tony also serves as an arbitrator on the Roster of Neutrals for the American Arbitration Association.

Daniel E. Fierstein is an Associate in the Construction Group of Cohen Seglias and focuses his practice on construction law. Dan counsels clients at all tiers of the construction industry, including general contractors, subcontractors, owners, developers, and design professionals.

Background

In the first significant public private partnership (“P3”) infrastructure project in Pennsylvania, PennDOT recently selected Plenary Walsh Keystone Partners (“Plenary Walsh”) for award of the Rapid Bridge Replacement program. Under the P3 agreement, Plenary Walsh is required to demolish 558 bridges in various states of disrepair throughout Pennsylvania and to construct new bridges in their place within three years of work commencement in the summer of 2015. According to PennDOT, this P3 procurement will result in both cost and time savings. PennDOT states that it would have taken it eight to twelve years to complete the replacement bridge work under conventional procedures. PennDOT estimated that the cost of the work using traditional means would have been over $2 million per bridge, whereas the cost through this P3 agreement is approximately $1.6 million per bridge.

bridge maintenance workPennDOT’s Rationale for Selecting Plenary Walsh

Plenary Walsh narrowly edged-out competitor Keystone Bridge Partners (“Keystone”), scoring 95.14 on PennDOT’s grading scale, as compared to Keystone’s grade of 94.77. The Plenary Walsh consortium includes Plenary Group, The Walsh Group, Granite Construction Co., and HDR Engineering. Keystone includes Kiewit, Parsons, and DBi. PennDOT stated that it selected Plenary Walsh over Keystone because of Plenary Walsh’s commitment to complete the 558 bridges eight months earlier than required, its $899 million price, and other key elements of its proposal, such as the traffic management plan and quality control plan. PennDOT Secretary Barry Schoch said that the goal for the project was not only finding cost savings, but also minimizing impact to the traveling public, which was reflected in the traffic management plan and the plan to complete eight months early in Plenary Walsh’s proposal. According to PennDOT’s press release, PennDOT also considered the financial capability to carry out the project, the background and experience in managing comparable projects, and the understanding of the project in selecting Plenary Walsh.

What Does This Mean for Those Seeking Award of Future Rapid Bridge Replacement P3s?

The takeaways for consortiums on future bridge replacement projects are that price, cost savings, experience, and financial capability remain fundamental considerations. Should these considerations be nearly equal between competing consortiums, the winning proposal is likely to be the one that demonstrates early completion of the project and a careful traffic management plan calculated to minimize the impact to the traveling public.

Tony Byler is a Partner at Cohen Seglias Pallas Greenhall & Furman PC and a member of the Construction Group. As a trial lawyer, he focuses his practice on representing public and private owners, contractors, subcontractors and material men.

Jason C. Tomasulo is Senior Counsel at Cohen Seglias Pallas Greenhall & Furman PC. He focuses his practice on construction law and represents owners, general contractors, subcontractors, suppliers and sureties.

 

In the wake of the significant transportation funding legislation passed at the end of November 2013, Pennsylvania’s Department of Transportation wasted no time issuing a request for qualifications (“RFQ“), seeking statements of qualifications from potential concessionaires to replace hundreds of structurally deficient bridges through a public private partnership (“P3”).  PennDOT has also issued four addenda to the RFQ. Additionally, PennDOT prepared lists and maps of the structurally deficient bridges for consideration by potential concessionaires. These efforts have created new construction opportunities for contractors.

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In 2012, Pennsylvania passed legislation authorizing the use of P3s on transportation projects. The P3 law created the Public Private Transportation Board, which must approve all P3 projects.  The Rapid Bridge Replacement project was approved by the Board on Sept. 27, 2013.  Shortly thereafter, on November 6, 2013, PennDOT hosted an industry forum to educate potential, private-sector stakeholders on the scope and requirements, and to seek input on certain issues associated with the procurement. In addition, PennDOT participated in the Fall Seminar of the Associated Pennsylvania Constructors (APC), a trade association of contractors, consulting engineers, material suppliers, manufacturers, and others with an interest in Pennsylvania’s road and bridge construction industry. At the Seminar, Bryan Kendro, PennDOT’s Director of Office of Policy & Public Private Partnerships, moderated a panel discussion on the P3 model, which addressed the legal issues and identified examples of P3 modeling from other states, including the I-495 “HOT Lanes” project in Virginia. This firm is a member of the APC, participates in its programs, and provides legal seminars to its membership.

The Challenge

Pennsylvania has the third-largest number of bridges in the United States, and has the largest number of bridges classified as “structurally deficient.” Approximately, 4,500 or 18 percent of the Commonwealth’s bridges are structurally deficient while the national average is only 7.3 percent.  Id.  The average age of bridges in Pennsylvania is over 50 years old.  Id.

The Project

The goal of PennDOT’s Rapid Bridge Replacement project is to replace at least 500 geographically dispersed, structurally deficient, bridges across the Commonwealth in less than 5 years.  The project contemplates creating efficiencies through economies of scale, innovation, and optimal risk allocation that will allow PennDOT to deliver more bridges at a lower whole life cost than a traditional design, bid, build procurement.  PennDOT is seeking innovative solutions from the concessionaire to deliver quality bridges on a large scale as quickly as possible, while providing good value and minimal inconvenience to the public.  In addition, PennDOT hopes to improve the connectivity of the Commonwealth’s transportation network, while minimizing the impacts on the traveling public.  PennDOT plans to remove weight restrictions on the new bridges, which PennDOT believes will increase the efficiency of freight and commercial transportation and benefit the Pennsylvania economy as a whole.

The P3 Model

PennDOT seeks a partner that will design, build, finance, operate, and maintain the bridges for an extended period of time, probably between 25-35 years. PennDOT chose the P3 model for this project because it will:

  • Allow PennDOT to replace structurally deficient bridges more quickly by allowing future funding to be moved forward to get projects completed today at current costs instead of several years or even decades later.
  • Generate savings for PennDOT and Pennsylvania’s taxpayers in the short-term and over the life of the bridges. P3 projects generate efficiencies of scale in the design and construction phase and, over the long term, can generate maintenance savings.
  • Allow PennDOT to use these savings to address other infrastructure needs.
  • Minimize impact on travelling public by coordinating these projects with other programmed projects.

An important reason for using the P3 model is to obtain private financing through the concessionaire to help pay for the project. Accordingly, PennDOT intends to make “availability” payments to the concessionaire for 25-35 years after substantial completion of defined portions of the project, as well as the project as a whole. The availability payments will be based on the concessionaire’s ability to keep the bridges properly maintained and available for use, with PennDOT able to make deductions for poor performance. PennDOT also anticipates making progress payments according to the achievement of specific events relating to construction of the project.  PennDOT intends to use state and federal funds to fulfill its payment obligations. The details regarding payments will be specified in a future request for proposals (“RFP”). The P3 model’s financing and continuing maintenance obligations fall outside the traditional public construction delivery model and present new challenges for contractors seeking to participate.

Next Steps

The deadline for the statements of qualification from prospective concessionaires is 1:00 p.m. on January 31, 2014. PennDOT anticipates short-listing up to four proposers by March 3, 2014.  PennDOT then intends to circulate a draft RFP to the short listed proposers in March 2014, with a final RFP planned for June 2014. The deadline for proposals is planned in September 2014, with selection of the successful concessionaire in October 2014 and commercial closing of the financing in December 2014.

We will continue to monitor and report on these exciting P3 developments in Pennsylvania and throughout the country. Please let us know if you have questions.

Jason C. Tomasulo is Senior Counsel at Cohen Seglias Pallas Greenhall & Furman PC. He focuses his practice on construction law and represents owners, general contractors, subcontractors, suppliers and sureties.

Tony Byler is a Partner at Cohen Seglias Pallas Greenhall & Furman PC and a member of the Construction Group. As a trial lawyer, he focuses his practice on representing public and private owners, contractors, subcontractors and material men.

In the construction industry, mediation has become an extremely popular vehicle for resolving disputes that develop during and after projects. It is particularly appealing because (i) it can provide an early opportunity for the parties to resolve a case in lieu of more protracted and expensive litigation and (ii) if the case does not resolve, the communications, factual, and legal positions taken during the mediation will remain confidential and cannot come into play at trial.

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Last month, the New Jersey Supreme Court handed down a decision that may profoundly affect these fundamental principles of mediation in New Jersey. In Willingboro Mall, Ltd. v. 240/242 Franklin Avenue, LLC, the Court addressed two key mediation issues: (i) whether verbal settlement agreements reached at mediation are enforceable and (ii) whether communications made in the course of such discussions are privileged from future disclosure. The Court issued two essential holdings that apply to mediations taking place in New Jersey. First, from now on, settlements reached at mediations that are not reduced to a written agreement and signed by the parties before the mediation comes to a close will not be enforceable. Second, while communications occurring during mediation ordinarily are considered privileged and confidential, that privilege can be waived by a party.

How Did The Owner Waive The Mediation-Communication Privilege?

In Willingboro, the owner of the Willingboro Mall sued a buyer over the terms of the sale. At the trial court’s direction, the parties mediated their dispute and, at mediation, agreed upon settlement terms verbally. When the buyer advised the Court that the parties settled, the property owner balked, sparking litigation over whether a settlement agreement was in place. The buyer asked the court to enforce the verbal agreement, and, in response, the seller asked the court to not to enforce it. In support of their arguments, both sides revealed communications that took place during mediation. The Supreme Court found that the owner waived the mediation-communication privilege by referencing the confidential mediation communications in its opposition to the buyer’s motion to enforce the settlement agreement. According to the Court, if the seller wanted to preserve the confidentiality of the negotiations that took place during mediation, it should have asked the court to strike the buyer’s motion without disclosing confidential mediation communications in its response.

What Are The Future Implications Of This Case?

Despite ruling that the parties’ verbal settlement agreement was enforceable, the Court held that, going forward, in order to be enforceable, settlement agreements reached at mediations in New Jersey will need to be executed in writing either before the completion of the mediation or immediately thereafter during an extension of the mediation “for a brief but reasonable period of time.” Since settlements are often reached and formalized during the days and weeks after a mediation session, parties in this situation would be wise to agree in writing that the mediation will remain open for a definitive time period so that a settlement down the road is not undermined by the Supreme Court’s ruling in Willingboro Mall. Interestingly, the Court seemed to suggest that an audio- or video-recorded agreement could meet the written agreement requirement.

With regard to the mediation communication privilege, while, as a general rule, communications between parties at mediation remain confidential and are not subject to disclosure, the Willingboro Mall case serves as a cautionary reminder that a party seeking the protection of the privilege invoke it before making a disclosure that could waive it.

Tony Byler is a Partner at Cohen Seglias Pallas Greenhall & Furman PC and a member of the Construction Group. As a trial lawyer, he focuses his practice on representing public and private owners, contractors, subcontractors and material men.

Kathleen M. Morley is an Associate with Cohen Seglias Pallas Greenhall & Furman PC and a member of the Construction Group.

By: Tony Byler and Kathleen Morley

Mechanics’ lien claims are powerful tools for contractors and suppliers who are owed payment for work or materials. To be enforceable, the contractor or supplier (“Contractor”) must file a lien claim within six months of completing its work. Recently, in Neelu Enterprises, Inc. d/b/a KB Builders v. Ashok Agarwal et al., the Pennsylvania Superior Court clarified the term “work” to exclude corrective work from its meaning. Based on the Court’s explanation of “work” as it pertains to the lien law, the six-month time clock for filing a lien could start to run well before the Contractor performs its last work at a project. In other words, Contractors should be more vigilant with regard to protecting their lien rights because those rights could start to expire well before the Contractor actually performs its last work at a project.

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Under Pennsylvania’s Mechanics’ Lien Law (the “Lien Law”), a Contractor must file its lien claim within six months of completing its work. If a Contractor files a lien claim more than six months after it has completed its work, a court can dismiss the lien and leave the Contractor without lien rights. Given such high stakes, the calculation of the six-month timeframe is critical to ensuring the preservation of lien rights.

Determining a Contractor’s last date of work for the purpose of filing a lien is not as easy as it may seem because the Lien Law does not explain the circumstances under which the Contractor has “completed” its work. For example, does the clock start running when the final punch list is complete? Is it when the Contractor was last on site, or, in the case of a supplier, the date on which the last materials were delivered? What about when warranty work or material is performed or supplied many months after demobilization? The Lien Law does not answer these critical questions, which means the courts must fill in the gaps.

The Law after Neelu Enterprises

In Neelu Enterprises, the Superior Court shed light on the issue of work completion. The issue before the Court in Neelu Enterprises was whether the Contractor had timely filed a mechanics’ lien claim within the six-month limitation period under the Lien Law. After performing significant work without being paid, the project owner terminated the Contractor. Many months after termination, the Contractor returned to the site to perform corrective work at no additional cost to the owner. Thereafter, the Contractor filed a lien claim, using its last date of corrective work as its completion date, not the date on which it was terminated. The owner argued that the Contractor’s lien claim was untimely because it was filed more than six months after the Contractor was terminated. The Contractor argued that its lien claim was timely because it had performed work (albeit corrective work) less than six months prior to the filing of its claim. The Court ultimately rejected the Contractor’s argument, finding that the Contractor’s lien rights began to expire from the date on which it was terminated, not the date on which it last performed the corrective work.

In reaching its decision, the Court found significant that the Contractor sought payment for the work it performed prior to its termination, rather than for the corrective work that the Contractor performed after the termination at no cost to the owner. Relying on an opinion of the Pennsylvania Supreme Court dating to 1890, the Court distinguished extra work from corrective work, reasoning that the performance of extra work (such as change order work) entitled the contractor to additional payment and, therefore, prolonged the running of the six-month clock. Conversely, the Court reasoned that corrective work does not entitle a contractor to additional compensation and, therefore, does not extend the six-month time limitation.

While the Court in Neelu Enterprises dealt specifically with corrective work, the Court’s reasoning could arguably apply to any type of work that is performed without cost to the owner or for which payment has already been made (e.g., punch list, warranty and gratuitous work).

Recommendation

As a result of the Neelu Enterprises decision, when Contactors are not being paid in accordance with the terms of their contracts, they must be mindful of the nature of the work they are performing because it affects how much time they have to file a lien claim. As a consequence, keep this easy-to-remember saying in mind when determining whether your company’s work is complete: “if the Owner doesn’t have to pay, the six-month lien clock is likely in play.”

Tony Byler is a Partner at Cohen Seglias Pallas Greenhall & Furman PC and a member of the Construction Group. As a trial lawyer, he focuses his practice on representing public and private owners, contractors, subcontractors and material men.

Kathleen M. Morley is an Associate with Cohen Seglias Pallas Greenhall & Furman PC and a member of the Construction Group.

By: Tony Byler and Daniella Gordon

Suppliers frequently provide supplies on lines of credit to contractor customers who are involved in multiple construction projects.  In an ideal world, both the customer and the supplier would maintain accounting records keeping each construction project and the payments attributable to those construction projects separate and accurate.  Out of practical convenience, however, contractors and the suppliers sometimes lump projects and payments into a single account, making it difficult, if not impossible, for the supplier to determine which payments apply to each ongoing project, i.e., a task that is necessary for a supplier seeking to assert a mechanics’ lien claim against a particular project when its customer fails to timely pay.

Several weeks ago the Appellate Division of the New Jersey Superior Court, in L&W Supply Corporation v. Joe Desilva, described the affirmative duty suppliers have to determine the source of its customers’ payments for materials, by requiring suppliers to ask.  According to the Court, a supplier who fails to do so “sacrifices its rights under the Construction Lien Law.”   A brief review of the evolving mechanics’ lien laws relating to suppliers helps explain the Court’s potentially severe ruling.

New Jersey’s Construction Lien Law

The New Jersey Construction Lien Law (“Lien Law”) allows contractors and suppliers who are owed payment for work or materials on privately procured projects to file a lien against the property where the improvements (labor and supplies) were constructed.  The lien encumbers the property, which prevents the owner from selling or transferring the property without first dealing with the contractor’s or supplier’s payment claim.

The purpose of the Lien Law is twofold: first, to secure payment of money due to contractors and suppliers; and second, to protect owners from paying more than once for the same work or materials.  In order to protect owners from being forced to pay twice for the same work or materials, the Lien Law provides that the value of a lien cannot exceed the value of the “lien fund,” which, in the simplest terms, is the amount of money that remains unpaid on the job.

Suppliers’ Evolving Affirmative Duty to Inquire into the Source of Payments

In 2004 the New Jersey Supreme Court held, in Craft v. Stevenson Lumber Yard Inc., that a material supplier who files a construction lien has a duty to allocate payments from the material purchaser to the appropriate construction project when the supplier has “reason to know” that the payment is associated with a particular project.  In other words, if a general contractor pays a subcontractor for work on a specific job and the subcontractor then pays its supplier, the supplier must apply the subcontractor’s payment to the same project account.  The supplier may not simply apply the payment to an older receivable from a different project.  This requirement protects the owner from double payment because it helps to ensure that when a supplier files a construction lien relating to a particular project, the supplier is not seeking monies owed from the subcontractor on a different project.

L&W Supply: The Supplier’s Duty Explained

In L&W Supply, the Appellate Division clarified the circumstances that would give a supplier “reason to know” the source of the payment.  The Court held that in order to ascertain the source of a subcontractor’s funds, “a supplier must take some action, and an inquiry about the source of the funds is the most obvious action to take.”  In other words, suppliers providing material to New Jersey projects must now affirmatively inquire as to how payments should be allocated when the purchaser has not otherwise provided reliable instructions as to how the payment should be allocated.  As the Appellate Division held, “when the purchaser of materials has not provided specific, reliable instruction as to the allocation of its payment, or when the circumstances are such that a reasonable supplier should suspect the purchaser has not used an owner’s funds to pay for materials supplied for that owner, then the supplier must make further inquiry and attempt to ascertain the source of the payment funds so that it can allocate them to the correct accounts.”

The Court’s decision in L&W Supply means that suppliers must be diligent in ascertaining the source of the funds that it receives from its customers, and we recommend that the supplier should memorialize its efforts in writing.  This should be done in writing because a supplier who files a lien claim after this L&W Supply decision must anticipate that the owner or general contractor will defend against the lien claim by (i) challenging the accuracy of the supplier’s accounting and (ii) questioning the sufficiency of the supplier’s inquiry into the subcontractor’s accounting.  Documented efforts by the supplier to ascertain the source of payments are the best way to overcome those challenges because they demonstrate the supplier’s good faith efforts to inquire and accurately account for customer payments.

Tony Byler is a Partner at Cohen Seglias Pallas Greenhall & Furman PC and a member of the Construction Group. As a trial lawyer, he focuses his practice on representing public and private owners, contractors, subcontractors and material men.

Daniella Gordon is a litigation Associate in the Construction Group. She represents clients in a wide range of construction related matters, including public bidding contests, construction defect claims, and appeals.