Transcript PowerPoint Template

European Society of Construction Law
Deutsche Gesellschaft fur Baurecht e.V.
The Top 10 (or so) Recent Developments
in U.S. Construction Law
of Which Every Contractor Working
in the United States Should Be Aware
Presented by
John B. Tieder, Esq.
Alex N. Lamme, Esq.
2011 Annual Meeting
Frankfurt, Germany
10 – 12 November 2011
8405 Greensboro Drive, Suite 100
McLean, VA 22102
703-749-1000 (p)
[email protected]
[email protected]
Summary
I.
II.
III.
IV.
V.
VI.
Organization of U.S. Legal System
Public Contracts
U.S. Government Contracts – Focus on “Fraud & Abuse”
Contractor Licensing
Public-Private Partnerships (P3)
Freedom of Contract
•
Exceptions
•
Payment
VII. Performance Bonds
VIII. Demise of Arbitration
IX.
Dispute Review Boards
X.
Liquidated Damages
XI.
Liability to Non-Contract Parties – The Economic Loss Doctrine
XII. Consequential Damages
XIII. Green Construction
XIV. 50-State Survey
Page  2
I. Organization of United States
Legal System
Page  3
Federal Court System
1 Supreme Court (§ 1)
Other Courts as Established by Congress (§ 1)
Judges Have Lifetime Tenure
Trial by Jury (§ 2)
Page  4
U.S. Federal Court System
U.S. Supreme Court
• Created by Constitution (Article III)
– 13 U.S. Circuit of Appeals
– 12 Circuits
– Court of Appeals for Federal Circuit
– 94 Federal District Courts
– Specialized Courts
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Page  5
U.S. Court of Federal Claims
U.S. Court of International Trade
Court of Military Appeals
U.S. Court of Custom & Patent Appeals
Federal Jurisdiction
 Federal Questions
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Arising under Federal Law
Violations of Federal Constitution
Patents
Regulations under Federal Law
Admiralty or Maritime
Treaties
U.S. a Party
 Diversity Actions
• A dispute between citizens of any 2 different states in excess of
$75,000
• Suit between a foreign citizen and a U.S. citizen applying state law
Page  6
Typical Case
Instituted in a U.S. District Court
Right of Appeal to Circuit Court of Appeals
Right to Petition, but not be heard, by Supreme Court
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U.S. Court of Appeals and U.S. District Courts
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51+ Legal Systems
1 Federal System
50 State Systems
Territories and Provinces
• Puerto Rico
• Guam
Page  10
State Courts
50 State Courts - use New York as an example
Court of Appeals
• 4 Appellate Divisions
• 12 Judicial Districts
– 57 County Courts
Appeals from last Court of Appeals in State can go to
U.S. Supreme Court
• Very seldom in a commercial case
Page  11
Jurisdiction of State Courts
All Civil and Criminal Matters Not Federal in Nature
• Examples – Civil
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Personal Injury
Family Law
Commercial Disputes
Ownership of Property
Inheritance
• Examples – Criminal
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Page  12
Murder
Assault
Robbery
Embezzlement
Arson
II. Public Contracts
Page  13
Types of Public Contracts
 Direct U.S. Government Contracts
 U.S. Government Funded Contracts
 State Contracts
 Political Subdivisions within States
• Counties
• Cities / Town
• Special Purpose Entities
– Water Districts
– Sewer Districts
– School Districts
– Transit Districts
– ETC.
Page  14
Laws Applicable to Non-Federal
Public Contracts
 U.S. Laws of General Application
• Social / Economic Clauses
• Safety
• Labor
 U.S. Laws Applicable to Federally Funded Projects
• False Claims Acts, 18 U.S.C § 287, 31 U.S.C. §§ 3929-3933
• American Recovery & Reinvestment Act
– Report Effects on Employment
– Report Compensation of 5 Most Highly Paid Employees
– Buy American Compensation
 State Laws
• State Procurement Statutes
• State False Claims Acts
• Political Subdivisions within States
– Some are quite unusual
– e.g. Cannot bid if do business with Myanmar or Iran
Page  15
III. U.S. Government Direct Contracts
Page  16
Applicable Laws and Regulations
Basic Statutes
• Contract Disputes Act of 1978
• Buy American Act
• Others
Primary Regulations
• Federal Acquisition Regulations
Procuring Agency Regulations
• U.S. Army Corps of Engineers
• U.S. Department of State
• General Services Administration
Page  17
Improper (False) Claims –
Federal Criminal and Civil Statutory Scheme
Criminal Liability
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Making False Statements, 18 U.S.C. § 1001
False Claims Act, 18 U.S.C. § 287
Mail / Wire Fraud, 18 U.S.C.§§ 1341, 1343
Conspiracy to Defraud Govt., 18 U.S.C. § 286
Major Fraud Act, 18 U.S.C. § 1031
Federal Enforcement and Recovery Act of 2009
Civil Liability
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Page  18
False Claims Act, 31 U.S.C. § 3929-33
Anti-Kickback Act, 41 U.S.C. §§ 51 to 58
Forfeiture of Fraudulent Claims Act, 28 U.S.C. § 2514
Contract Disputes Act, 41 U.S.C. § 604
Improper (False) Claims –
What Is a Claim?
Any request or demand, whether under a contract or
otherwise, for money or property which is made to a
contractor, grantee, or other recipients if the United
States provides and portion of the money or property
which is requested or demanded or if the Government
will reimburse such contractor, grantee, or other recipient
for any portion of the money or property which is
requested or demanded
Page  19
Improper (False) Claims –
What Is a “False Claim?
 Knowingly presents, or causes to be presented, to an
officer or employee of the United States or a member of
the Armed Forces as a false or fraudulent claim for
payment or approval
 Knowingly makes, uses or causes to be made or used, a
false record or statement to get a false or fraudulent claim
paid or approved by the Government
 Conspires to defraud the Government by getting a false or
fraudulent claim allowed or paid
 Has possession, custody or control of property or money
used, or to be used, by the Government and, intending to
defraud the Government or willfully to conceal the property,
delivers, or causes to be delivered, less property than the
amount for which the person received the certificate or
receipt
Page  20
Improper (False) Claims –
What Is a “False Claim?
 Authorizes or delivers a document certifying receipt of
property used, or to be used, by the Government and,
intending to defraud the Government, makes or delivers
the receipt without completely knowing that the information
on the receipt is true
 Knowingly buys, or receives as a pledge of an obligation or
debt, public property from an officer or employee of the
Government, or a member of the Armed Forces, who
lawfully may not sell the pledged property
 Knowingly makes, uses or causes to be made or used, a
false record or statement to conceal, avoid, or decrease an
obligation to pay or transmit money or property to the
Government
Page  21
Improper (False) Claims –
Examples of False Claims
False Certification
Reverse False Claims
Subcontractor’s Pass-Through Claims
Overstating Damages
Double Billing
Deliberate Misbranding or Substitution of Materials
Labor Issues
Equipment / Material Issues
Page  22
Improper (False) Claims –
Damages for False Claims Act Violations
Civil Penalty of $5,000 to $10,000 per violation
Treble Damages
Debarment
Criminal Liability
Benefit to Qui Tam Relator
Page  23
Improper (False) Claims –
Reporting Violations to the Government
 Amended FAR § 52.203-14(b)(3) – December 2008
• Contractors must “timely” notify Government of:
1) Violations of Civil False Claims Act (FCA)
2) Violations criminal statutes upon “credible evidence” of
such violations
3) Receipt of “significant overpayments” from the
Government
• “Knowing failure” to timely disclose violation can lead to
suspension or debarment;
 Amended FAR § 52.203-14(b)(3) – December 2008
• “FULL COOPERATION” in investigations; and
• Mandate that certain previously excepted Contractors
establish a compliance program and internal control system
Page  24
IV. Contractor Licensing
Page  25
IV. Contractor Licensing
 Licensing is a State-by-State Issue
 Types of License
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Professional, i.e., Architect or Engineer
General (Main) Contractor
Specialty Subcontract
Construction Manager
 Failure to Have Proper License at Time of Contracting
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Page  26
Bid Not Accepted on Public Contracts
No Problem if License Obtained During Contract
No Entitlement to Payment
Criminal Proceedings
V. Public-Private Partnerships
Page  27
Public-Private Partnerships
New to United States
Only some states authorize, e.g., Florida, Georgia
Projects with Revenue Potential
• Toll Roads
• Bridges
• Water & Sewage Treatment Facilities
Re-Coup Costs of Construction and Make Profit
Page  28
VI. Freedom of Contract
Page  29
VI. Freedom of Contract
 In Private Contracts, Few Limitations
 Nothing Comparable to German VOB
 In Public Contracts, More Requirements
 Some Exceptions
• Prompt payment of subcontractors and suppliers
• Indemnification against sole negligence
– By Statute
– By Case Law
• Non-Enforcement of “No Damages for Delay” Clauses
– By Statute
– By Case Law
Page  30
VII. Performance & Payment Bonds
Page  31
Performance & Payment Bonds
Performance Bond – Outside (Insurance) Guarantee of
100% of Contract Value
• Owner has direct recourse
Payment Bond – Outside (Insurance) Guarantee for
Payment of Subcontractor and Suppliers
• Set at various levels
• Subcontractor and Suppliers have direct recourse
Required for All Public Contracts
Usual Practice on Private Contracts
Cost is .75% - 2+% of Contract Value
Page  32
VIII. Demise of Arbitration
Page  33
Demise of Arbitration
 More Common in Private than Public Contracts
 Less Sophisticated than ICC or Other International Arbitrations
 No Right of Appeal
 Trend is to Non-Jury (i.e. judge only) Trials with Right of Appeal
 Should Be Contract-by-Contract Determination Depending on
Many Factors
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Location of Project
Likely Nature of Dispute
Ability to Appeal Arbitration
Amount of Discovery
 Many Problems Can Be Overcome by Drafting of Arbitration
Clause
Page  34
IX. Disputes Review Boards
Page  35
Disputes Review Boards
Panel of Experts who Make Initial Determination of
Claims
Non-Legal Proceeding
Not Binding
Can Be Introduced Into Evidence in a Court or
Arbitration Proceeding
Page  36
X. Liquidated Damages
Page  37
Liquidated Damages

Liquidated Damages are a good-faith pre-determined amount of
loss applicable to a specified event, e.g., a day of delay
Liquidated Damages are not a penalty as that concept is applied
in Civil Law Jurisdictions
Cannot be adjusted by Court or Arbitrator
3 Approaches Depending on State
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1)
2)
3)
Page  38
Always applied unless shown to be a penalty
Applied if a good faith calculation of amount is shown regardless of
actual loss
“Look Back”, i.e., specified amount bears some reasonable
relationship to actual loss
XI. Economic Loss Doctrine
Page  39
Economic Loss Doctrine
Are Engineers and Contractors Liable to Parties with
Whom They Have No Contractual Relationship for
Purely Economic Losses?
Purely Economic Losses = Increased Cost of
Performing Work, Additional Overhead, Lost Profits Not
Related to Personal Injury or Damage to Property
3 variations Depending on State
• Never Liable
• Always Liable
• Liable only When the relationship is so close it is equal to
a Contractual Relationship
Page  40
XII. Waiver of Consequential Damages
Page  41
Waiver of Consequential Damages
Consequential Damages = Those Not Reasonably
Foreseeable at Time of Contracting, e.g., lost profits to
Owner if contract not completed in time
Generally Waivable in All States, But Must Be Explicit
Page  42
XIII. Green Construction
Page  43
Green Construction
Green Construction – Design and Construct with Minimal
Negative Impact on Environment, e.g., production of
carbon dioxide
Standards are Still Evolving; No National or Even State
Codes
Standards Set by Contract
Owners Pay Premium
Liability for Failure to meet Specified Standards
Page  44
XIV. 50 State Survey
Page  45
Questions?
Page  50