Happy New (Bar) Year, Construction Lawyers

By Matt Bouchard

Greetings, fellow members of the Construction Law Section, and welcome to the 2020-2021 bar year! It is my honor and privilege to serve as Chair this year and to work with an outstanding group of council members, committee co-chairs, and NCBA staff to reward your Section membership with top-notch programming, activities, content, and other benefits, all aimed at adding meaningful value to your law practices and professional development.

Like the clients and the industry that we serve, our Section will face unique challenges in the months ahead as North Carolina and the country at-large continue to navigate the COVID-19 pandemic. Those challenges include safely providing the same excellent CLE programming that has served as the cornerstone of our Section’s offerings each year. Toward that end, our CLE Committee is working diligently to transition its Summer 2020 program, originally scheduled for in-person presentation in Wilmington, to a webcast format. I urge all of you to mark your respective calendars for the Committee’s “Laying the Foundation, Brick by Brick” CLE webcast the afternoon of Thursday, September 24 and all day Friday, September 25. This not-to-be-missed “sticks-and-bricks” program will focus on a range of construction practices presented by industry experts as well as your Section cohorts, with sessions focused on zoning and other regulatory issues, civil and structural engineering, building envelope considerations, and much more (including Jay Wilkerson’s always anticipated case law update). Please watch this space for additional details soon. And since your calendars are now open, go ahead and mark Thursday, February 18, 2021, for our Winter CLE program and Annual Meeting, to be held in-person (fingers crossed!) at the Bar Center in Cary. Again, details to follow.

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Effective June 26, 2020: Face Coverings Required At Construction Sites Where Six Feet Of Social Distancing Is Not Possible

By Riley W. Smith

On June 24, 2020, Gov. Roy Cooper signed Executive Order No. 147 (“Order 147”), which extends North Carolina’s Phase 2 easing of coronavirus restrictions until 5 p.m. on July 17, 2020. Significantly, Executive Order No. 147 not only delays Phase 3 easing of restrictions but also includes certain amendments to Gov. Cooper’s original Phase 2 Order requiring additional protective measures to mitigate the spread of COVID-19. These additional measures, which went into effect at 5 p.m. on Friday, June 26, 2020, include a requirement for face coverings at construction sites. Specifically, and pursuant to Section II of Order 147, Gov. Cooper’s initial Phase 2 order has been amended to require that all construction workers “must wear face coverings when they are or may be within six (6) feet of another person.”

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In the Uncertain Times of COVID-19, the Bar can Provide a Source of Refuge for those with Questions – Volunteer Opportunities

By Brett M. Becker

During these uncertain times and the impacts of COVID-19, many people are left with questions and a lack of resources to find answers. The Construction Law Section has an opportunity to provide its knowledge and be a source for those with these needs.

The North Carolina Bar Foundation now has three COVID-19 Virtual Legal Hotlines scheduled, and we have been invited to participate in any or all of them:

COVID-19 Legal Hotlines:

Register here to volunteer for the May 21 Western N.C. event

Register here to volunteer for the May 29 Triangle Area event

Register here to volunteer for the June 12 Triad event

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OSHA Releases COVID-19 Guidance for the Construction Workforce

By Jonathan Massell 

As we have all witnessed, the COVID-19 situation remains incredibly fluid and presents unique challenges to the construction industry, which has been deemed an essential business in the Carolinas. On April 21, 2020, OSHA issued an alert containing COVID-19 safety guidance that is specifically directed to the construction industry. A copy of the one page OSHA alert can be viewed here: https://www.osha.gov/Publications/OSHA4000.pdf.

It is imperative that construction professionals review the OSHA guidance and ensure that they are taking all necessary steps to comply. This is important not only for protecting the health and safety of construction workers and the general public, but also for avoiding a possible OSHA violation for failure to adhere to its COVID-19 safety guidance. As many in the industry know, OSHA’s General Duty clause is very broadly enforced. Though current supply shortages of PPE and various cleaning materials present obstacles to compliance, construction professionals should do their best to follow the OSHA guidance by using the resources they have available. As an additional step, we recommend that construction professionals print out and post the linked OSHA guidance at their jobsites and office locations as a visual reminder to their workers of the steps necessary to keep themselves and the general public safe.

Construction Law Alert: COVID-19’s Impacts on Construction Projects

This article was originally published by Nexsen Pruet and has been reposted with permission.

By Eric H. Biesecker

COVID-19 and the ensuing shutdown of much of the economy will affect construction projects dramatically. Projects have become more difficult to perform as industry participants juggle their obligations to their customers, employees, and the public. The impacts will get worse before they get better. This article identifies some construction law issues facing owners, contractors, subcontractors, and suppliers grappling with the impacts of the virus.

When a contractor or subcontractor cannot meet the project schedule, does COVID-19 excuse the delay and warrant a time extension? It depends on the language of the contract. As discussed by my colleague, David Robinson, in his March 3 Insight, in most US jurisdictions, epidemics, pandemics, and other unforeseeable Acts of God do not automatically excuse breaches of contract. In order to determine whether COVID 19 provides an excuse, begin by looking at the terms of the relevant contract.

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Beware of the Risks! No Ownership, No Lien

Republished with permission from Smith Anderson.

A recent North Carolina Court of Appeals decision reiterates the importance of knowing who you are dealing with when undertaking work or selling materials in connection with any construction or development project in our state. In a recent decision the Court of Appeals found that the design firm that performed design services for a prospective property purchaser could not properly assert a lien on the property, given the design services were never actually used to improve the property.  While this case involved a design firm, the lesson of this case extends to any party providing labor or materials on any type of construction or development project in the state. Read more here.

Written by:

Andrew Atkins
Peter Marino 
Patrick Wilson

 

The Mid-Winter CLE is Just Around the Corner!

By Jonathan Massell

As the robot in Lost in Space would say, “Danger, Will Robinson.” However, this alert is not about a warning to a pioneering family of space colonists.  Rather, it is a warning to you, as a member of the Construction Law Section, that the deadline for this year’s Mid-Winter CLE is fast approaching and you are in danger if you have not registered. Here is the rest of the story . . .

This year’s Mid-Winter CLE will take place on Thursday, February 20, 2020 at the NC Bar Center in Cary. The program is titled: Construction Law Potpourri: An Assortment of “Trends and Changes” Topics Requested by Our Members. Designed to address a variety of topics, this program addresses an assortment of trends and changes in the field. These topics, chosen by the section members, include basic lien law at the forefront of a dispute, the bankruptcy considerations at the tail end of a dispute and everything in between. Each session provides practical information for the everyday practice of construction law. Don’t hesitate to register if you wish to attend as those who register by January 30, 2020 will receive a 10% discount. Pasted below is a link to the online brochure containing the detailed agenda and list of speakers.

On a final note, a networking reception will be held the night before the CLE between 5:00-6:30 p.m. at Whiskey Kitchen, 201 West Martin Street, Raleigh. Even if you are unable to attend the CLE, please try to swing by the networking reception to enjoy drinks and appetizers with your fellow Section members.

Link to brochure:

https://www.ncbar.org/media/990576/837clp_web.pdf

Construction Law Section Nominations

To all Section members:

As chair of the Section’s Nominations Committee, I am pleased to invite your nominations for the next class of at-large members of the Section’s Council as well as for the Evelyn M. Coman Award for Distinguished Service in the Field of Construction Law.

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Fair Housing for Construction Lawyers

By Luke J. Farley Sr.

When you think about the statutes and codes that govern the construction and design process in North Carolina, does the N.C. Fair Housing Act come to mind? Probably not—but it should, or your clients may be needlessly exposing themselves to an expensive risk. According to Lawyers Weekly, in 2016 one of the largest settlements in North Carolina resulted from a construction and design dispute under the N.C. Fair Housing Act (NCFHA). The developers, builders, and architects of the SkyHouse high rise apartments in Raleigh and Charlotte agreed to pay $1.8M to correct sliding door thresholds which were inaccessible to people with disabilities. This wasn’t an isolated case. Owners, contractors, and designers around the country have paid out millions of dollars to resolve fair housing construction disputes. You and your clients can’t afford to be unaware of the Fair Housing Act.

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Exceptions to the Economic Loss Rule in North and South Carolina

In North Carolina, the economic loss rule will not bar recovery on a negligence claim when there is no contract between the parties. In Lord v. Customized Consulting Specialty, Inc., a general contractor contracted with the plaintiff owners to construct a home. The owners subsequently sued the general contractor for alleged defects in the home’s construction. The general contractor named as defendants the subcontractors with whom the general contractor had contracted with to provide the trusses for the home. These subcontractor defendants asserted that the economic loss rule should apply to bar the plaintiffs’ negligence claim against them. The court acknowledged that, “simply stated, the economic loss rule prohibits recovery for purely economic loss in tort, as such claims are instead governed by contract law.” However, the court recognized the economic loss rule is not fair to those plaintiffs who have suffered economic loss or damage from improper construction but “who have no basis for recovery in contract” in the absence of a contract between the parties. Therefore, the court held “that the [subcontractor defendants] had a duty to use reasonable care in performing its promise to provide reliable trusses to [the general contractor] for use in the construction of the [plaintiffs’] residence, and it further held that because there was no contract between the plaintiffs and the subcontractor defendants, the economic loss rule did not apply and therefore did “not operate to bar the plaintiffs’ negligence claims.”

The North Carolina Court of Appeals recently acknowledged in the 2016 case Buffa v. Cygnature Constr. & Dev., Inc., 796 S.E.2d 64 (unpublished) Lord’s holding that the economic loss rule does not bar a negligence claim where there is no contract between parties in a home construction case. However, the court qualified this holding by stating that “where a basis for recovery is available by warranty,” the economic loss rule will apply to prevent recovery for purely economic loss under a negligence claim. In this case, the plaintiffs sustained damage to their home as a result of defective windows. The seller of the windows did not have a contract with the plaintiffs, as the windows were purchased by the subcontractor who installed the windows. These windows were covered by the manufacturer’s express warranty. Because a basis for recovery was available by warranty, the court held that it was appropriate to apply the economic loss rule to bar negligence claims seeking to recover for purely economic loss.

However, it may be important to note that the Buffa case concerned an express warranty. A more detailed analysis may be required as to the issue of whether an implied warranty would bar a negligence claim per the economic loss rule, but the general rule in North Carolina is that a contract “is required to assert a claim for breach of an implied warranty involving only economic loss.” Energy Inv’rs Fund, L.P. v. Metric Constructors, Inc., 351 N.C. 331, 338, 525 S.E.2d 441, 446 (2000). Therefore, the economic loss rule will likely bar negligence claims if a court has recognized the existence of an implied warranty, because an implied warranty typically only exists when there is a contract between parties.

South Carolina law is complicated in that there are a number of uncoordinated opinions touching on the subject. However, similar to the Lord case above, the South Carolina Supreme Court has ruled that the economic loss rule will not bar a negligence action against a builder when a legal duty has been violated, “no matter the type of resulting damage. . . . But the economic loss rule will apply [to bar negligence actions] where duties are created solely by contract.” Kennedy v. Columbia Lumber & Mfg. Co. This case further emphasized that “privity of contract as a defense to an implied warranty action” has been abolished in South Carolina. So, unlike in North Carolina, the existence of an implied warranty is not likely to bar a negligence claim for economic loss in South Carolina where there is no contract between the parties. Further, in Beachwalk Villas Condo. Ass’n, Inc. v. Martin, the holding in Kennedy was expanded to architects in addition to builders, as the court stated that “architects may be held liable to home buyers for negligence in connection with home construction projects and breach of implied warranty where no contractual privity exists between the architect and the home buyer.” However, the South Carolina Supreme Court has since held that the principle set forth in Kennedy is limited to the residential real estate construction context. Sapp v. Ford Motor Co.

In sum, in both North and South Carolina the economic loss rule will not apply in certain instances to bar recovery for purely economic loss in tort, although the justification for such an exception may differ somewhat between the two states. Therefore, if a party seeks to recover for pure economic loss and does not have adequate recourse via typical contract law, it would be wise to explore the various exceptions in North and South Carolina regarding the economic loss rule when bringing a claim.

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