Construction Law Signal - Insights & Information on Current & Emerging Developments affecting the Construction Industry

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.

The Six-Month Lien Time Clock

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.

By: Jennifer R. Budd and George E. Pallas

A bill allowing the New Jersey Turnpike Authority (“NJTA”) to enter into design-build contracts has been introduced in the New Jersey Assembly (A1561) and the Senate (S1211). The NJTA is the entity charged with maintaining and implementing capital improvements on the New Jersey Turnpike and the Garden State Parkway. The bill, if passed, would give the NJTA the discretion to administer any project through a design-build contract, rather than through the current design-bid-build method of procurement.

How It Will Work

According to the bill, if the NJTA decides to bid a project as a design-build, the NJTA must adhere to a two-phase procedure for awarding the contract. Under the first phase, the NJTA would qualify interested bidders, which may include joint ventures, by the issuance of a Request for Qualification. The Request for Qualification will list information such as the minimum qualifications needed by the design-build entity, a scope of work statement, the maximum time allowed for the project and the NJTA’s estimated costs of design and construction. Of the phase one bidders that respond to the Request for Qualification, the NJTA must select at least two but no more than five bidders to participate in a second phase Request for Proposal (“RFP”) solicitation.

For the second phase, the NJTA will issue an RFP to the remaining bidders. In response, those contractors will submit a technical proposal and a sealed price bid. The technical proposal will be reviewed by a technical review committee, given a score, and that score shall be submitted to the NJTA and made public. The NJTA will set a minimum technical proposal score, and any proposal that does not meet the minimum shall be rejected. Once the NJTA has determined which proposals have met the minimum score, the price bids will be opened publically, and the NJTA must award the project to the design-build entity with the lowest bid.

The Bill Has Some Traction

During the 2010-2011 term, legislators introduced a similar bill, and the Assembly Transportation, Public Work and Independent Authorities Committee unanimously passed it with amendments. The NJTA bill is very similar to the version passed by the Committee last year, which may be suggestive of the legislature’s belief that design-build bidding will be more efficient and cost effective for the NJTA.

Implications On Contractors

If passed, this bill could have widespread effects on highway and road contractors in New Jersey. Due to the high level of engineering, design and technical skill required to compete in price, and the cost of retaining such professional services, many small and mid-sized contractors could be squeezed out of the competition. On the other hand, larger contractors may enjoy the independence that often accompanies design-build construction since the contractors will have the benefit of design input from project inception.

Notwithstanding the additional independence, contractors should keep in mind that design-build projects are fraught with higher risk because design-builders are responsible for all phases of the project and any liability stemming from it. Additionally, unlike in design-bid-build construction where the contractor can look to the owner or the designer to share the costs from unanticipated circumstances, a design-build contractor is less likely to benefit from such cost-sharing.

Jennifer R. Budd is an Associate at Cohen Seglias Pallas Greenhall & Furman PC and a member of the Construction Group.

George E. Pallas is the Treasurer of the Firm as well as a Shareholder and member of the Board of Directors. He is also a Partner with the Firm’s Construction Group.

Daniel E. Fierstein, an Associate with the Firm contributed to this post.

By: Marian Kornilowicz and Mark Leavy

If you are a resident of Philadelphia, then you likely know about the ongoing turmoil surrounding Mayor Nutter’s pursuit of real estate tax reform. His plan is known as the Actual Value Initiative, or AVI, and will have the effect of increasing the real estate property taxes paid by homeowners in certain neighborhoods and lowering them in others.

Due to widespread concerns that there might be a dramatic increase in the taxes paid by homeowners, implementation of the AVI was postponed until the 2014 tax year. On October 18, 2012, the state Senate passed a bill necessary for the AVI to go into effect, and Governor Corbett is expected to sign the bill.

There is a critically important deadline coming up - November 15, 2012 - that no Philadelphia homeowner should miss. Even though it is more than a year before the new tax assessment and rates will go into effect in 2014, homeowners must submit a Homestead Exemption application by November 15, 2012 (if they have not already done so). As long as your Philadelphia residence is your primary residence, you can obtain a $30,000 reduction in the assessed value of your property for real estate tax purposes.

There is no reason not to take advantage of the potential tax savings – even though the actual dollar value of the “savings” you may realize is unknown. And, of course, calling it a “tax savings” may not really be accurate since the Homestead Exemption will probably only result in less of an increase in your taxes as a result of the AVI. This is shown in the following explanation and example.

The existing real estate tax law applies a tax rate to the “assessed value” of a property. The “assessed value” is currently set by the City at 32% of the “market value.” In 2012, the tax rate was 9.432%. So, for $100,000 of “market value,” 2012 real estate taxes were in the amount of $3,018.24 (9.432% x 32% x $100,000). In 2013, the tax rate is being increased to 9.771%. This results in taxes of $3,126.72 per $100,000. (9.771% x 32% x $100,000), or an increase of $108.48 per $100,000.

One of the big issues with the existing tax law was that the “market values” actually used are grossly inconsistent with reality. Typically, higher valued residential properties were grossly under-assessed and lower valued residential properties were over-assessed for tax purposes. This led to highly skewed real estate taxes for homeowners across the City. (Interestingly, commercial real estate was generally more accurately assessed.)

The AVI is intended to make the tax system more fair by using market values that reflect the current “actual value” of real estate. This is of great concern to homeowners because – instead of basing real estate taxes on 32% of the “market value” – taxes will now be based on 100% of the market value! For example and at the 2013 tax rate, real estate taxes on $100,000 of property value would be $9,771.00 – a more than $6,600 increase.

It is easy to see in this example how big of a difference the $30,000 Homestead Exemption could make. Using the same example of $100,000 of property value, the Homestead Exemption would apply real estate taxes based on $70,000 – which, at the 2013 tax rate, would produce taxes of $6,839.70. In this example, the Homestead Exemption would reduce taxes by in taxes of almost $3,000.

Now, real estate taxes will not become three times what they were “overnight” as shown in this example. It is expected that the AVI program will be implemented with a new, “lower” tax rate. The big question on everyone’s mind is what the new rate is going to be – and it remains unknown for every homeowner at what value their home will be assessed, and what their resulting real estate taxes will be.

So, no one knows for sure how much their 2014 taxes will be. About the only thing you can be sure about is that a $30,000 reduction in market value under the Homestead Exemption will blunt the impact of the tax increase coming in 2014.

This is the web link to apply for the Homestead Exemption online.

Marian A. Kornilowicz is the Chair of the Business Practice Group of Cohen Seglias Pallas Greenhall & Furman PC. His practice is concentrated in the representation of clients in varied business transactions and real estate matters.

Mark J. Leavy is an Associate with the Firm and specializes in employment litigation at the trial and appellate levels.

Separate but commonly owned or related companies are common place in the construction industry. It is also common for contractors to get squeezed by late or nonpaying owners and/or subcontractors demanding payment for work performed. A recent case in New Jersey highlighted the pitfalls contactors and their owners can fall into in these situations, and the harsh ramifications they could face if they don’t follow corporate policies and are less than honest in their representations to owners and their subcontractors.

AACON Contracting, LLC v. Glen Poppe et al

In AACON Contracting, LLC v. Glen Poppe et al. (A-1500-11T2), the Appellate Division in New Jersey upheld a trial court decision that found that Glen Poppe, individually, and the three corporations that he owned and controlled, Walter H. Poppe General Contractors, Poppe Construction (“Poppe Construction”) and Poppe Contracting (“Poppe Contracting”), were jointly liable to their subcontractor, AACON Contracting, LLC (“AACON”) for fraud. AACON contracted with one of the Poppe entities, Poppe Construction, to serve as a masonry and concrete subcontractor for the construction of a new Walgreens pharmacy. Prior to entering into the subcontract with AACON, Poppe Construction represented that it was the general contractor and had a contract with Walgreens. But in actuality, a different entity, Poppe Contracting, was the party that had a contract with Walgreens.

Project Background

During the course of the Project a dispute arose between Poppe Construction and AACON regarding the installation of a concrete floor. The third entity, Walter H. Poppe General Contractors, was the company issuing payments to AACON. These payments stopped when the dispute arose, resulting in the withholding of the contract balance from AACON. However, Poppe Contracting continued to represent to Walgreens in its payment applications that it was paying AACON, and Walgreens continued make payments. At the same time, Poppe Construction was representing to AACON that that it could not pay AACON because it had not received payment from Walgreens, and that AACON would be paid when Poppe Construction was paid by Walgreens. AACON relied upon these representations and continued working.

The Dispute

AACON then filed a construction lien claim against the project for unpaid work. Walgreens paid AACON $34,900 in exchange for AACON’s completion of its work and discharge of the lien. AACON arbitrated its payment dispute with Poppe Construction, and was awarded the majority of its contract balance. AACON then filed a lawsuit against all three corporations and Glen Poppe, individually, for, among other things, fraud. The trial court held Glenn Poppe and all three corporations liable for fraud.

Corporate and Personal Liability for Fraud

The Court’s finding of fraud was based on several key facts: (1) that Poppe Construction represented to AACON that it had a contract with Walgreens when it didn’t; (2) Poppe Contracting and Glenn Poppe represented to AACON that it would be paid when Walgreens issued payment, when in fact Walgreens had already issued payment to Walter H. Poppe General Contractors; (3) Poppe Contracting represented to Walgreens that it had paid AACON for its work, when it fact it hadn’t; and (4) AACON was induced to continue working on the project by Poppe Construction’s misrepresentation that it had not yet been paid by Walgreens.

Finally, and perhaps most significantly, the Court held that Glen Poppe was personally liable for the fraud of the corporations because he clearly controlled all three corporations and was the sole individual responsible for “the shuffling of these corporations” to avoid their payment obligations to AACON.

The Takeaway

The Poppe case reminds us of the importance of maintaining corporate formalities when operating related businesses, and that when they are not, the related entities, and the individuals who control them, can be jointly liable for their debts. Most importantly, general contractors, and their principals and officers, must avoid making false certifications to owners regarding the status of payments to owners, and also false statements to subcontractors regarding the status of payments from owners, lest be subject to claims of fraud and personal liability.

Robert Ruggieri is a Senior Associate at Cohen Seglias Pallas Greenhall & Furman PC and practices in the area of complex construction litigation.

Jennifer Budd, an Associate with Cohen Seglias contributed to this post.

By: Jennifer M. Horn

The “Gist of the Action” Doctrine may bar plaintiffs from asserting tort-based claims, such as fraud, where the “gist” of the lawsuit is the breach of a contract. Although the Pennsylvania Supreme Court has not yet adopted the Gist of the Action Doctrine, the Pennsylvania Superior Court has done so on several occasions. In the recent case of Mendelsohn, Drucker & Associates v. Titan Atlas Manufacturing, Inc. (Civil Action No.12-453), U.S. federal court for the Eastern District of Pennsylvania strengthened the foothold of the Gist of the Action Doctrine in Pennsylvania by predicting that the Pennsylvania Supreme Court, if presented with the question, would adopt the Doctrine. The Eastern District also clarified an exception to the Gist of the Action Doctrine where allegations of fraudulent inducement were present. Although the Mendelsohn case involved a contract for legal services, its holding applies to other types of contracts, including construction.

The Mendelsohn Case

The Mendelsohn case involved a lawsuit between a law firm, Mendelsohn, Drucker & Associates (“Mendelsohn” or the “Firm”), and Titan Atlas Manufacturing, Inc. (“Titan”), whom Mendelsohn represented in separate litigation arising from Titan’s business activities. Although Titan failed to make timely payment to Mendelsohn for legal services rendered, it provided assurances to the Firm that payment would be forthcoming. After working for months, allegedly in reliance on the promises of payment, Mendelsohn finally withdrew as counsel and filed a complaint in the Eastern District of Pennsylvania against Titan, seeking $402,511.06 in unpaid legal fees. In addition to the underlying breach of contract claim, Mendelsohn alleged a tort-based claim of fraudulent inducement, based upon multiple promises from Titan and its CEO that the legal fees would be paid.

The “Gist of the Action” Rule . . . And The Exception . . .

Titan sought dismissal of the lawsuit based on the Gist of the Action Doctrine, which typically precludes plaintiffs from pursuing tort actions where the underlying “gist” of the action is the breach of contractual duties. Notably, the Pennsylvania Supreme Court has not yet recognized the doctrine. Where the state Supreme Court has not yet ruled on an issue, a U.S. federal court, such as the U.S. Court for the Eastern District of Pennsylvania, is required to predict how the state Supereme court would rule, and hold accordingly. The Eastern District, with the guidance of prior Pennsylvania Superior Court cases, predicted in the Mendelsohn case that the Pennsylvania Supreme Court would recognize the Gist of the Action Doctrine.

In addition, the Eastern District held that a certain exception to the Gist of the Action Doctrine would allow the tort claim to proceed, even though the alleged breach of a contract was central to the dispute. The Mendelson Court noted that sometimes the Doctrine is applied categorically, in that it bars fraud actions in connection with the performance of a contract, but does not preclude fraud in the inducement. This Court rejected that approach, and instead, engaged in what it called a “fact-intensive analysis of the parties’ conduct in relation to the fraud alleged.”

Although the District Court stopped short of holding that any fraudulent inducement claim would be an exception to the Doctrine, the Court ruled that where the fraudulent inducement was, as here, “collateral to the contract,” such claims would not be barred. The Court’s justification was its finding that the fraudulent act of promising payment, when no payment was forthcoming, was not itself a breach of the contract, but rather a breach of a duty “honestly imposed by society.” As a result, the tort claims were “collateral to the contract” and not barred by the Gist of the Action Doctrine.

The Takeaway

Although the Pennsylvania Supreme Court has yet to issue a ruling regarding the Gist of the Action Doctrine, the Eastern District provided another example of its impact and a critical exception. In this regard, plaintiffs will likely be able to plead the tort-based claim of “fraudulent inducement” along side a breach of contract claim, but only where that fraudulent inducement arises from actions that are “collateral to the contract.” Significantly, in the view of the Eastern District, inducing a party to continue work under a contract by promising to provide payment constitutes inducement “collateral to the contract.” Thus, a cause of action for such conduct is not barred by the Doctrine. Potential litigants must be aware of this possible defense to tort claims, and the important exception.

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.

Christopher Polchin, a Summer Associate with Cohen Seglias, contributed to this post.

By: Lori Wisniewski Azzara and Robert G. Ruggieri

Philadelphia City Counsel recently passed Bill No. 120428-A, which amends Chapter 9-3400 of The Philadelphia Code, to establish a system of benchmarking and reporting energy and water usage data for certain commercial buildings and mixed-use buildings.

The Mayor’s Office of Sustainability is responsible for administering the Ordinance, which applies to “Covered Buildings,” which include commercial buildings with an indoor floor space of 50,000 square feet or greater and commercial portions of mixed-use buildings where a total of at least 50,000 square feet of indoor floor space is devoted to any commercial use.

Under the Ordinance, Covered Buildings must annually report their energy usage (electricity, natural gas, steam and heating oil), water usage and building characteristics through an internet-based data system known as “Portfolio Manager.” Building owners can arrange for their energy and water usage information to be electronically reported directly by the utility/energy supplier. However, building owners must still annually report their building’s characteristics, including, among other statistics, the age of the building, type of use, operating hours, portion of the building that is heated and/or air conditioned, and the number of computers and refrigerators used in the building.

Tenants occupying space in a Covered Building do not have a separate reporting requirement. However, if the tenant’s space is separately metered by a utility company, the tenant must timely provide the required reporting data to the owner.

Failure to comply with the reporting requirements within thirty (30) days of the reporting deadline will result in a $300 fine, plus $100 each day thereafter.

Most notable is the Ordinance’s disclosure requirement. The data reported on a Covered Building is to be provided, upon request, to prospective buyers or lessees. In addition, the Ordinance contemplates having the data available online so that property owners, tenants, prospective purchasers and the public at large can view and compare energy and water usage among buildings. The disclosure will be especially beneficial to prospective tenants and/or buyers who have unique or specific energy needs or goals. It will also allow property owners to see how their buildings perform in comparison to other similar buildings, thereby allowing owners to make their buildings more energy efficient to keep up with market demands.

“Step by step, we are taking action to make Philadelphia the Greenest City in America,” said Councilwoman Reynolds Brown, co-sponsor of the Ordinance and Chair of City Council’s Committee on the Environment. Philadelphia now joins Austin, New York, San Francisco, Seattle and the District of Columbia as cities that have passed energy benchmarking laws.

Lori Wisniewski Azzara is an Associate at Cohen Seglias Pallas Greenhall & Furman PC. Ms. Azzara practices in the areas of construction and commercial litigation and has experience in contract negotiation, claims for delay and inefficiency, mechanics’ liens, and all types of contractual disputes.

Robert Ruggieri is a Senior Associate at Cohen Seglias Pallas Greenhall & Furman PC and practices in the area of complex construction litigation.

By: Steve Williams

Pennsylvania now has a law that prescribes how landlords must handle a tenant's abandoned property in certain circumstances. Senate Bill 887 was signed into law by Governor Corbett on July 5, 2012 (as Act 129-2012), becomes effective on August 4, 2012, and amends the Landlord and Tenant Act.  

In summary, Act 129 requires that tenants remove their personal property when they relinquish possession of an apartment. Relinquishment occurs when a tenant is evicted, or when he vacates, removes substantially all of his personal belongings and gives his landlord a forwarding address or written notice that he has abandoned. The Act provides for a period of time during which a landlord must hold the abandoned property for the tenant to retrieve, and it provides for payment to landlords for removal and storage costs in some cases. Finally, the Act requires that tenants be provided notice of landlords' rights under the Act.

As a result of the Act, landlords may want to consider amending their leases, or preparing a lease addendum, to provide the required notice. In addition, landlords may want to create a form notice letter to be sent to tenants who leave property behind.

There is more to the Act, and a careful reading of it is recommended. For more information, contact Steve Williams at (717) 234-5530 or swilliams@cohenseglias.com.

Steve Williams is Managing Partner in the Firm’s Harrisburg office, and a member of the Firm's Commercial Litigation and Employment Law Groups.

By: Robert J. O'Brien and Robert G. Ruggieri

In a matter of first impression in Pennsylvania, the Commonwealth Court in Ribarchak v. Municipal Authority of the City of Monongahela recently addressed the issue of whether the use of a subcontractor’s bid as part of a general contractor’s bid proposal creates a contract between the subcontractor and the general contractor, particularly when the general contractor’s bid proposal is ultimately accepted by the owner.

In Ribarchak, the Municipal Authority of the City of Monongahela solicited bids from general contractors for the renovation of a sewage treatment plant. Galway Bay Corporation submitted a bid that included Fisher Associates as a subcontractor. The Municipal Authority ultimately accepted Galway’s bid. Several months later, Galway decided to substitute another subcontractor in place of Fisher, and Fisher filed suit, alleging breach of contract.

Fisher contended that Galway’s inclusion of Fisher’s bid in Galway’s bid to the Municipal Authority created a binding contract between Galway and Fisher. The Commonwealth Court, however, disagreed with Fisher’s argument. Looking to case law from other states, the Court adopted the general rule that:

“A subcontractor bidder merely makes an offer that is converted into a contract by a regularly communicated acceptance conveyed to him by the general contractor. No contractual relationship is created between the subcontractor and the general contractor even though the bid is used as part of the general over-all bid by the general contractor and accepted by the awarding authority.”

As a result of this decision, in Pennsylvania, a general contractor’s use of a subcontractor’s bid as part of the general contractor’s bid proposal does not create a binding agreement between the general contractor and the subcontractor.

Notably, the Court did suggest that its conclusion may have been different if there were other evidence that the general contractor had accepted the subcontractor’s bid. Although Ribarchak sends a message to contractors and subcontractors that express acceptance of an offer is necessary to form a legally-binding contract, Pennsylvania courts have yet to address precisely what is required for acceptance.

This area of the law continues to present novel and interesting questions that can lead to problems for general contractors and subcontractors alike. General contractors wondering how to protect their rights or subcontractors concerned about the enforceability of a contractual arrangement should contact their attorney for more information.

Robert O'Brien is an Associate with Cohen Seglias Pallas Greenhall & Furman PC and is a member of the Construction Group.

Robert Ruggieri is a Senior Associate at Cohen Seglias Pallas Greenhall & Furman PC and practices in the area of complex construction litigation.

By: Jennifer M. Horn

As part of an ongoing series, Construction Law Signal will examine basic construction contract clauses and offer tips for navigating the nuanced arena that is the negotiated construction contract.

“No Damage for Delay” Clauses On Public Projects: In the Mid-Atlantic Region, Geography Matters

A “No Damage for Delay” provision is a classic construction clause that, if present in the contract, provides that where a contractor is delayed by an event that is not the contractor’s fault, the contractor’s remedy in that instance is limited to an extension of time – and no additional money is provided. However, more time can be little consolation to the contractor when every dollar counts. A myriad of issues can result in delay on a job site. Unforeseen subsurface site conditions can cause delay. These could include:

• Inclement weather;
• Acts of God;
• Design changes;
• Problems with obtaining access to one’s work site;
• Strikes and/or labor disputes; and
• Failure to have timely delivered material and equipment.

In addition, poor project coordination, the inability to mobilize adequate labor and/or delays caused by the actions or failure of another contractor to act on a project also frequently result in delay.

As a consequence, costs associated with delay may occur. These costs may manifest in the form of wage escalation, extended equipment costs, or inefficiency. Also, increased finance costs, extended job supervision and field overhead costs, and reduced profits are typical costs associated with delay.

In the realm of public contracts, where the contractor can not negotiate the terms of the contract, different states have reached different conclusions about the validity of the “no damage for delay” clauses that limit a contractor’s ability to recover money in addition to being granted an extension of time in which to perform the work. For instance, in New Jersey and Virginia, legislation provides that “no damage for delay” clauses are void against public policy.

In Maryland, Pennsylvania and Delaware, however, the validity of “no damage for delay” clauses has been upheld in various courts of law.In short, one must be cognizant of the controlling contractual jurisdiction before jumping to conclusions regarding the force and effect of “no damage for delay” clauses in a construction contract.

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.

I recently had the pleasure to chat with Robert W. Bertazon, founder of Maryland Construction Network, an innovative forum for the Maryland construction industry. I asked Mr. Bertazon to comment on the genesis of the Maryland Construction Network and his hopes for its growth in the coming years.

Jennifer Horn: What is the Maryland Construction Network?

Rob Bertazon: The Maryland Construction Network is a unique construction forum designed to deliver news and educational information to contractors and other industry professionals through audio podcasts that can be accessed 24 hours a day via the internet.

Horn: Why Podcasts?

Bertazon: Contractors and construction industry professionals are often plagued with long commutes to various jobsites – it’s the nature of the beast. My podcasts are essentially pre-recorded radio-type segments that a contractor can access and repeat at any time – especially in the car. It’s a way to gain valuable information and put some of those long commuting hours to good use.

Horn: How has the Maryland Construction Industry reacted to the idea? 

Bertazon: The reaction has been resoundingly positive and continues to exceed our expectations. Contractors especially appreciate the index of topics available on our website and the ability to pick and choose which segments to download and repeat. In addition, contractors are able to comment on each segment using the Network’s Blog.

Horn: What types of programming have you featured?

Bertazon: Our podcasts, to date, have included useful news segments about upcoming and ongoing Maryland Construction Projects. We have also featured interviews with surety and legal professionals discussing particular aspects of the business. Providing practical tips to improve one’s construction business is another cornerstone of programming.

Horn: How can we tune in?

Bertazon: You can listen to the free programming by tuning in at www.mdconstructionnet.net or through iTunes. We welcome all feedback and look forward to watching the evolution of the Network in the coming years.

Robert Bertazon can be reached at 443-982-7503 or rob@mdconstuctionnet.net. For more information about the Maryland Construction Network, please visit www.mdconstructionnet.net.

By: Lori Wisniewski Azzara and Jennifer M. Horn

As a follow up to its 2006 report, the Natural Resources Defense Council (NRDC) has issued a new report – Rooftops to Rivers II – that provides case studies for 14 geographically diverse cities that employ green infrastructure solutions to address stormwater challenges. These leading cities, which include Philadelphia and Pittsburgh, have recognized the beneficial uses to stormwater, thereby reducing pollution and overall costs.

The NRDC estimates that 10 trillion gallons of untreated stormwater runs off of roofs, roads, parking lots and other paved surfaces a year. By implementing a green infrastructure, cities can not only save money but also minimize stormwater pollution and sewage overflow problems. The report recognizes the multitude of benefits a green infrastructure provides over conventional infrastructures (i.e., underground storage systems and pipes), particularly its cost-effectiveness, flood resilience and augmented local water supply.

The report identified six key actions that cities should take to maximize their green infrastructure investment and become “Emerald Cities,” including:

• Developing a long-term green infrastructure plan;
• Enforcing a strong retention standard for stormwater;
• Requiring the use of green infrastructure to reduce and manage runoff;
• Incentivizing residential and commercial property owners to install green infrastructures;
• Providing assistance in accomplishing green infrastructure; and
• Ensuring that a long-term and dedicated funding source is available to support the green infrastructure investment.

Of the 14 cities, Philadelphia was the only city to achieve all six Emerald City criteria and is the nation’s first city to formally commit to using green infrastructure as the primary means to satisfy its sewer overflow obligations. Pittsburgh achieved one of six Emerald City criteria by passing an ordinance that establishes stormwater volume reductions standards, including a requirement that developments larger than 10,000 square feet retain the first inch of rainfall on-site.

Lori Wisniewski Azzara is an associate at Cohen Seglias Pallas Greenhall & Furman PC. Mrs. Azzara practices in the areas of construction and commercial litigation and has experience in contract negotiation, claims for delay and inefficiency, mechanics’ liens, and all types of contractual disputes.

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: Melissa C. Angeline

On November 7, 2011, the New Jersey Department of Labor and Workforce Development (DOL) released a new 6-page workplace notice for all New Jersey employers. The Employer Obligation to Maintain and Report Records Regarding Wages, Benefits, Taxes and Other Contributions and Assessments Pursuant to State Wage, Benefit and Tax Laws, contains a detailed description of employer recordkeeping requirements under state employment laws and provides contact information for employees or their representatives to report potential violations.

Importantly, the notice went into effect immediately for all new hires. The DOL requires that anyone hired on or after November 7, 2011 receive a copy of the notice “at the time of hire.” Thus, New Jersey employers should distribute copies of the notice to anyone hired on or after November 7, 2011.

As for existing employees, the DOL has established a December 7, 2011 deadline for distributing copies of the notice, either in hard copy or by e-mail, and for posting the notice. Employers must post the notice in hard copy at a conspicuous location in the workplace, and must post the notice electronically on any intranet or internet systems to which all employees have exclusive access.

Employers that typically buy pre-packaged posters covering various federal and state employment laws should contact their vendor immediately to obtain posters updated as of November 7, 2011. In the meantime, employers can download the 6-page notice from the DOL’s internet site and post it alongside their other mandatory notices.

Melissa C. Angeline is senior counsel in the Labor & Employment Group of Cohen Seglias Pallas Greenhall & Furman PC. She concentrates her practice on representing and counseling employers in all aspects of employment law.

By: Lori Wisniewski Azzara and Robert G. Ruggieri

On October 20, 2011, Senate Bill No. 1227 was introduced to the Pennsylvania Senate. The bill requires that funds paid by an owner to a contractor for work performed and/or materials furnished by a subcontractor be held in trust by the contractor, as trustee, for the purpose of paying the subcontractor. Titled the “Contractor Commingling of Funds Held in Trust Act,” the proposed bill does not require that the funds be maintained in a separate bank account, and the trustee can commingle the funds with other non-trust funds without being subject to civil or criminal penalties. However, the trustee will be subject to personal liability if he or she knowingly uses the funds for any purpose other than to pay the subcontractor. A “trustee” is defined as an officer, director or managing agent of the contractor who has control of, or direction over, the funds.

The proposed bill does not apply to residential property on which there is or will be a residential building not more than three stories in height, not including the basement, or to home improvement contracts as defined by the Home Improvement Consumer Protection Act.

Several other states, including New Jersey, Delaware, Maryland, and New York, have enacted similar construction trust fund statutes in an attempt to ensure that subcontractors are paid the monies owed to them for labor and/or materials supplied to construction projects. If passed in Pennsylvania, the proposed bill will provide useful remedies for subcontractors and will also impose significant obligations and penalties on contractors. We will continue to follow this proposed bill as it makes its way through the Pennsylvania legislature.

Lori Wisniewski Azzara is an associate at Cohen Seglias Pallas Greenhall & Furman PC. Mrs. Azzara practices in the areas of construction and commercial litigation and has experience in contract negotiation, claims for delay and inefficiency, mechanics’ liens, and all types of contractual disputes.

Robert Ruggieri is an associate at Cohen Seglias and a member of the Construction Group. He concentrates his practices in the area of complex construction litigation.

By: Jennifer M. Horn and Robert Ruggieri

A September 1, 2011 decision by the Maryland Court of Special Appeals reminds us of the critical importance of strictly following contractual and procurement procedures before performing change order work for a pubic entity; and of the perils of proceeding with work outside the scope of a contract without formal approval, even where employees and agents of the public entity request and provide informal, and even written authorization, for the additional work.

Baltimore County, Maryland v. AECOM Services, Inc., f/k/a DMJM H&N, Inc.

This case concerned a dispute between Baltimore County (County) and DMJM H&N, Inc., now known as AECOM Services, Inc. (DMJM) over payment for services performed by DMJM for the County in connection with the expansion of the Baltimore County Detention Center (Project). DMJM entered into a contract with the County to provide architectural and engineering services for the Project. The County sued DMJM seeking damages for an alleged breach of contract and negligence. DMJM countersued, seeking payment for services provided both under the “base contract” and for “additional services” performed outside the scope of the base contract. After trial, the jury found that DMJM did not breach its contract, and had not been negligent. More importantly, the jury awarded DMJM damages in the amount of $1,653,600, the majority of which included payment for the additional services. Appeals followed, with the most important issue being whether DMJM was entitled to payment for the additional services where DMJM had not obtained a formal contract amendment approved by the County Council for the additional services.

Language in the contract required not only written authorization by the County, but also approval by the County Council before the contract amount could be increased. DMJM claimed that during the course of the Project it had performed significant additional services valued at $1,471,498, that were authorized and requested by County officials, but had not been formally approved by a contract amendment.

The Court’s “Harsh” Ruling

The Appeals Court, relying on a strict interpretation of the contact, the Baltimore County Charter, the Baltimore County Code, and prior Maryland case law, reversed the jury’s award to DMJM for the additional services, and held that DMJM was not entitled to payment for any of the additional services because they were not formally approved by the County and County Council in a written amendment. First, the Court stated that the contract language unambiguously required written authorization from the County to obligate the County to pay for the additional services. Second, the Court found that the Baltimore County Code and Baltimore County Charter required that a contract amendment had to be approved by the County Council to be enforceable; because the County Council never approved an amendment for the additional services, the County could not be liable for payment. Finally, the Court relied on prior Maryland case law that set forth the principle that “a government entity may never have an obligation imposed upon it except in the formal manner expressly provided by law.” The rationale behind this principle, the Court provided, is that public funds must be protected by stringent procurement procedures, not only against outside parties, but even against its own employees and agents.

The Court was not persuaded by DMJM’s argument that County Council approval was only required for the underlying contracts, but not for changes to existing contracts. Nor did the Court accept DMJM’s argument that the County had waived its right to rely the strict procedures of the contract and Baltimore’s code and charter by acting and proceeding as if all the requirements had been met and informally approved and authorized the additional services.

The Court acknowledged that its ruling was harsh, but insisted that it was not unjust, and that there are sound policy reasons for its harshness. The Court reasoned that DMJM knew, or should have known, by the terms of the contract, that County Council approval was required for all amendments, and that the law imputes upon the party contracting with the municipality knowledge of the municipality’s limitations. The Court’s decision makes it abundantly clear that even if the additional services were done at the express request and direction of the County’s employees and agents, DMJM would still not be entitled to payment because the exact contract requirements were not fulfilled. The Court reasoned that it is more reasonable that an individual contractor or design professional occasionally suffer from the mistakes of public officials and agents who improperly authorize additional work than to risk detriment or injury to the public. The Court also reiterated that no state more rigidly enforces these principles than Maryland, and that those who deal with employees and agents of a Maryland municipality must, at their peril, take notice of the limits of the powers of both the municipality and those who assume to act as its agents and officers.

Not all states are as unforgiving as Maryland when it comes to allowing payment to contractors and design professionals who have performed work not approved in 100% accordance with contract requirements. States such as Pennsylvania, in certain circumstances, will consider other factors, such as whether the municipality was prejudiced and/or whether the municipality, though its conduct of requesting and informally approving additional work, waived its right to rely on strict contractual procedures to avoid payment obligations. Nonetheless, this case provides an important lesson to all contractors and design professionals, in any state, of the importance of strictly following procedures for changed or extra work and the perils of not doing so, especially when contracting with public entities.

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.

Robert Ruggieri is an associate at Cohen Seglias and a member of the Construction Group. He concentrates his practices in the area of complex construction litigation.

By: Christopher Soper and Lane Kelman

Recently New Jersey State Senator, Bob Smith (D., Middlesex), chairman of the Senate Environment and Energy Committee, explained that New Jersey has “done such a good job at stimulating solar that the market is now crashing.”

In order to address this problem, Smith sponsored Senate Bill S2371 (Bill S2371) that would accelerate by one year the state requirements for how much renewable energy must be produced and consequently how many Solar Renewable Energy Credits (SRECs) power companies are required to purchase.

The Purpose of Senate Bill S2371

The goal of Bill S2371 is to increase the demand for SRECs in order to stabilize their price – a price that has decreased in past months due to fears of the expected oversupply. With the proposed increase in renewable energy requirements and the consequential increase in renewable energy credits, it is hoped that the SREC market will be able to transition to a balanced supply-demand scenario.

New Jersey had previously established a schedule for the amount of SRECs power companies would be required to purchase for each energy year through 2026. Bill S2371 proposes to remove the requirements previously established for energy year 2013 and instead use the requirements established for energy year 2014. This would result in the requirements for energy year 2013 increasing from 596,000 to 772,000. The balance of the established schedule would remain the same, just moved ahead one year. This would allow the solar industry to continue to grow at a controlled rate through 2025.

Next Steps for Senate Bill S2371

Bill S2371 was passed by the Senate, received in the Assembly, and referred to the Assembly Telecommunications and Utilities Committee on June 29, 2011. It is anticipated that Governor Christie’s administration will not accept Bill S2371 as is, but will agree to a compromise that addresses the cost of solar for ratepayers. Cohen Seglias will continue to monitor the development of Bill S2371.

Lane Kelman is a Partner and Christopher Soper is an associate with Cohen Seglias. Both are members of the Construction Practice Group.

By: Robert Ruggieri

Last week we blogged about an important decision recently handed down by the Third Circuit Court of Appeals on the enforceability of pay-if-paid provisions in Pennsylvania. In Sloan & Company v. Liberty Mutual Insurance Company, a surety, Liberty Mutual, was found not liable to pay Sloan, a subcontractor, on a payment bond claim because of a valid pay-if-paid provision in the subcontract between Sloan and Shoemaker, the general contractor who had secured the payment bond. The Court held that Shoemaker did not have to pay Sloan in full because it did not get paid in full from the project owner. Because Shoemaker was not liable under the contract, the Court held that its surety could not be liable on the bond claim.

The Sloan case certainly clarifies many issues regarding pay-if-paid provisions and liquidating agreements in Pennsylvania. However, language in the Court’s opinion calls into question the opinion’s lasting impact, and suggests that particular aspects the Court’s ruling may be limited by developments in Pennsylvania’s Mechanics’ Lien Law (Lien Law) that went into effect after the subcontract in question was formed.

Pennsylvania’s Public Policy in Favor of Subcontractors’ Right to Secure Payment

In the Sloan case, the subcontract between Shoemaker and Sloan required that Sloan waive its right to file a mechanics’ lien. Sloan argued that if the surety was able to rely on the pay-if-paid provision in the subcontract as a defense to payment on Sloan’s bond claim, this would result in a situation that is contrary to Pennsylvania’s public policy that favors subcontractors’ right to secure payment.

This public policy is spelled out in a 2007 amendment to the Lien Law. Specifically, Section 1401(b) of the Lien Law makes lien waivers invalid, and unenforceable, unless they are given in exchange for payment for work performed by the subcontractor, or, unless the contractor has posted a bond guaranteeing payment for labor and materials provided by subcontractors.

The purpose of this provision is to provide subcontractors with an alternate avenue for recovery of payment in exchange for their waiver of lien rights. A subcontractor gives up the protection afforded by the lien in consideration for the protection of a surety bond. In Sloan, that protection was taken away by the pay-if-paid provision. Importantly, however, this provision of the Lien Law was not in effect at the time Sloan entered into the subcontract.

Surety’s Ability to Rely on Pay-if-Paid Provision May Be Contrary to Public Policy

In a footnote, the Court stated that its ruling in favor of the surety was not contrary to public policy because the Lien Law amendment came into affect after Sloan entered into the subcontract, and Sloan, without relying on this policy, freely accepted the tradeoff between a mechanic’s lien and a surety bond.

However, this footnote begs the questions:

• Would the Court have ruled the same way if Sloan entered into the subcontract after the 2007 Lien Law amendment? and;
• Going forward, will courts allow a surety to rely on a pay-if-paid provision in a contract entered into after the 2007 Lien Law amendment where the subcontractor was required to waive its lien rights?

The Court did not address these questions in its opinion. However, arguments can certainly be made that after the 2007 Lien Law amendments, it is against Pennsylvania public policy to allow a surety to rely on a pay-if-paid provision as a defense to a subcontractor’s payment bond claim, where the subcontractor was required to waive its right to file a lien; and, had the Sloan Court been interpreting a contract entered into after the amendments that its ruling would have been different.

Whats Next?

The Sloan decision does nothing to prevent a subcontractor, who waived its lien rights after the 2007 Lien Law amendment, from arguing that a surety’s reliance on a pay-if-paid provision is against Pennsylvania’s public policy. Subcontractors can, and will, argue that the purpose of the Lien Law amendment is to ensure that a subcontractor who is required to waive its lien right will have the protection of a payment bond; and that allowing a surety to rely upon a pay-if-paid provision to deny payment on a bond claim thwarts the very purpose of the surety bond and defeats the purpose of the Lien Law amendment.

On the other hand, sureties will rely on the Sloan decision, as well as other established principles of surety law holding that a surety’s liability is only triggered when the principal’s (general contractor’s) debt matures. Because the pay-if-paid provision prevents the general contractor’s debt from maturing, the surety cannot be held liable. Finally, sureties will argue that surety bonds are provided for the primary benefit and protection of the obligee, usually the owner, not the subcontractors, and therefore, a subcontractor’s reliance on the bonds is misplaced.

So, while the Sloan decision is certainly an important one in the line of cases dealing with pay-if-paid provisions, its impact may be limited and subject to change. In the realm of pay-if-paid provisions, many questions remain. It is likely that in the near future a court will have to answer the tough questions the Sloan Court was able to avoid.

Robert Ruggieri is an associate at Cohen Seglias Pallas Greenhall & Furman PC and practices in the area of complex construction litigation.

By: Jennifer M. Horn

As all subcontractors are aware, mechanics’ lien rights are precious tools to recover payment on a project for work performed. Often with the aid of a title search, subcontractors and their counsel strive to ascertain the exact identity of the “owner” of the land – a critical factor in any successful mechanics’ lien claim. The Maryland Mechanics’ Lien statute defines an “Owner” as “the Owner of the land except that, when the contractor executes the contract with a tenant for life or for years, ‘Owner’ means the tenant.” But what happens when a tenant controls the design and construction of the Project, provides funding, and is the ultimate beneficiary of the subcontractor’s work?

How Is “Ownership” Impacted For Lien Purposes When The Tenant Controls Construction?

In BRC Lease Company, LLC v. Audio Visual Innovations, Inc.,  corporations of the Johns Hopkins University, BRC/FSK, argued that they were not the proper “Owners” of the Johns Hopkins Biomedical Research Center located on the Bayview Campus because the National Institutes of Health (NIH), their tenant, controlled the design and construction of the project, provided funding and was the ultimate beneficiary of the subcontractor’s audio visual work. In upholding the plain language of the Maryland statute and in accordance with case law, the Maryland Court of Special Appeals confirmed that there was no merit in BRC/FSK’s argument that the NIH should be considered the “owner” because NIH did not contract with the subcontractor to install the equipment.

Impact Moving Forward

The recent decision means that prudent contractors can continue to rely on the plain meaning of the real property article. In particular, when identifying the “Owner of the land” for mechanics’ lien purposes, contractors (in addition to a properly run title search) should look to the contract for guidance.

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: Jason A. Copley and Kathleen M. Morely

Contractors and subcontractors, and really any business associated with construction, should be pleased with a new law that just took effect in Pennsylvania. In cases where there is more than one defendant, a plaintiff can only recover from each defendant the proportionate value of each defendant’s liability. In other words, each company found liable for negligence can only be required to pay the portion of liability that is attributed to them by a judge or jury.

What is Pennsylvania’s New Fair Share Act and How Does It Change Prior Law?

On June 28, 2011, Pennsylvania joined the majority of other states in adopting an act known as the “Fair Share Act”. In negligence actions where multiple defendants are at fault, the Fair Share Act limits the liability of each defendant to their share of responsibility for the loss. Prior to the adoption of the Fair Share Act, if multiple defendants were found to be liable for negligence, each defendant could be forced to pay the plaintiff for the full amount of the judgment.

To illustrate the change in the law, consider the following example under both the “old law” (prior to June 28, 2011) and the new law (the Fair Share Act): suppose a plaintiff is awarded $10,000 in damages in a negligence action involving three different defendant contractors, which the jury found to be 70% at fault (Contractor A), 25% at fault (Contractor B) and 5% at fault (Contractor C). Under the old law, even though the extent of each contractor’s fault varied considerably, each contractor was liable to the plaintiff for the full amount of the $10,000 judgment in the event the other defendants were unable to pay. That means that in this example, even though Contractor C was only 5% at fault ($500), that contractor or its carrier might be forced to pay the full $10,000. This concept is also referred to as “joint and several liability.”

In contrast, under the Fair Share Act, liability is only “several,” and not “joint,” meaning that each defendant is liable only for its percentage of liability. Therefore, in our example, under the new law, Contractor C would only be liable to plaintiff for $500 of the $10,000 award even if Contractor A and Contractor B were bankrupt and unable to pay.

Under the old law, defendants shared the risk of each defendant being able to pay his or her share of the judgment; whereas, under the Fair Share Act, a plaintiff now bears the risk of being able to collect from each defendant their actual share of liability.

Are There Any Exceptions or Limitations to the Fair Share Act’s Application?

Like most laws, there are exceptions to the Fair Share Act and limitations on the scope of its application. First, under the Fair Share Act, any defendant found to be 60% or more at fault for a plaintiff’s injuries can still be forced to pay the entire judgment just like under the old law. Second, the Fair Share Act does not affect contractual indemnity provisions. For instance, if a contract requires a subcontractor to indemnify a general contractor for injuries to third parties irrespective of fault, the contractor may seek contribution from the subcontractor pursuant to the terms of the contract. Third, the Fair Share Act only applies to claims arising after it went into effect on June 28, 2011. Therefore, the Fair Share Act would not apply to currently pending or newly instituted negligence actions that involve injuries occurring prior to June 28, 2011. Finally, the Fair Share Act does not apply to intentional torts and misrepresentations, as well as environmental and liquor law violations.

How Will the Fair Share Act Impact Contractors, Subcontractors and Pennsylvania Businesses Generally?

As with any new law, the Fair Share Act is subject to judicial interpretation and it is too early to predict with certainty what effect it will have on contractors, subcontractors and Pennsylvania businesses in general. Critics of the Fair Share Act argue that the new law will negatively impact innocent plaintiffs by limiting their ability to fully recover for injuries caused by multiple parties. Despite this criticism, however, the passage of the Fair Share Act appears, at least initially, to be a victory for Pennsylvania businesses who have frequently found themselves, or their carriers, paying a disproportionate amount of a loss.

Pennsylvania business groups, including the Pennsylvania Chamber of Business and Industry, Insurance Agents & Brokers of Pennsylvania and the Pennsylvania Association of Mutual Insurance Companies, supported the passage of the Fair Share Act and view it as favorable and necessary tort reform that will improve the Pennsylvania business climate, foster job creation, and reduce the cost of goods and services for consumers in the state.

Supporters of the Fair Share Act believe that the old law (i.e., joint and several liability) wrongly promoted frivolous litigation and lawsuits aimed at “deep pockets.” In this regard, the Fair Share Act relieves previous unwarranted pressure on solvent businesses to settle frivolous lawsuits out of fear of having to pay damages disproportionate to fault. Accordingly, at least on its face, the Fair Share Act ensures that a party’s level of financial responsibility is based upon matters of fairness and equity, rather than the extent of its coverage or ability to pay.

Our Construction Group will continue to monitor and track developments in this area of the law. A more detailed discussion of the Fair Share Act will also appear in the upcoming fall issue of Cohen Seglias’s quarterly newsletter, Construction in Brief.

Jason A. Copley is the Managing Partner at Cohen Seglias and a Partner in the Construction Group. His practice is focused on representing contractors, subcontractors and owners in the areas of construction and commercial litigation.

Kathleen M. Morley is an associate in the Construction Group.

If you are a Contractor performing residential home improvement work in New Jersey, a recent case clarifies that you may be subject to Consumer Fraud Act claims even when your contract is with a homeowner who serves as a “general contractor” on the project. In fact, such a contract is not only subject to the Consumer Fraud Act, but also to the Contractor’s Registration Act, and the Home Improvement Practices regulations adopted by the New Jersey Division of Consumer Affairs.

What Is The Consumer Fraud Act?

In 1960, the New Jersey Legislature enacted the Consumer Fraud Act “CFA”, (N.J.S.A. 52:17B-124; N.J.S.A. 56:8-3 ) to address consumer complaints regarding fraudulent construction practices in the market place. The CFA provides, among other things, that a successful homeowner who proves fraud be allowed to “treble” his damages against unscrupulous contractors and recover attorney’s fees. Since 1960, New Jersey Courts have held that the CFA should be “construed liberally in favor of consumers.”

If You Contract With A Homeowner - Even One Who Acts As The “General Contractor” On A Project – The CFA Applies

This month, the Superior Court of New Jersey rejected a contractor’s argument that a homeowner acting as a “general contractor” could not bring a claim under the CFA. In so doing, the Court pointed to the direct contractual relationship between the parties and concluded that “even if the plaintiff could be viewed as a general contractor with respect to the improvements to his home, he was entitled to the protection of the CFA in his dealings with contractors who performed [home] improvements.” This recent decision means that prudent contractors must assume that the CFA applies whenever a contract is entered into with a homeowner - even sophisticated homeowners who serve as their own general contractors.

Although the recent case focused primarily on the CFA, it addressed other consumer protections and serves as a reminder that New Jersey contractors must comply with all Home Improvement Practices Regulations (Administrative Code at N.J.A.C. 13:45A-16.1 et seq.). Also, as many contractors are aware, compliance with New Jersey’s Contractor’s Registration Act of 2004 is essential. The Contractor’s Registration Act requires every home improvement contractor to register with the Division of Consumer Affairs prior to performing work.

The Court acknowledged “the seriousness with which the legislature approached the perceived problems in [the home improvement] industry” and noted that such seriousness was reflected in the expansive language of the applicable laws as well as in the remedies – such as treble damages – that the consumer protection statutes afford.

As many in the industry are aware, Maryland became the first state to fully adopt the International Green Construction Code (IGCC) when Governor Martin O'Malley signed HB 972, effective March 1, 2012. In response to our IGCC blog post on this issue, authored by Lane Kelman, readers raised a multitude of questions that highlight a vast amount of confusion regarding the legislation. The questions range from the impact on the construction industry to the interpretation and application of the House Bill. A number of the issues that have been raised necessarily call into question the clarity of the legislation and, in turn, create legal issues. Some of the questions that have been raised are:

• What does the adoption of the IGCC mean for Maryland in the short and long term?
• Does House Bill 972 give a Local Maryland Jurisdiction the alternative of adopting the IGCC in addition to the Maryland Building Performance Standards?
• If a Local Maryland Jurisdiction adopts the IGCC, is compliance mandatory?
• What does the legislation mean for developers and contractors?
• Is Maryland's HB reflective of a national trend?
• Look for upcoming Blog posts on this important issue.

We will continue to report on the answers to these questions as the answers are clarified in the legislation. In the meantime, please contact Lane Kelman or Jennifer Horn with questions.

The State of New Jersey, in conjunction with the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE), is exploring the possibility of leasing portions of the continental shelf to wind power developers and studying the feasibility of large scale, offshore wind farms.

BOEMRE is a federal agency within the Department of the Interior that is charged with the oversight of offshore energy and mineral projects. BOEMRE worked with the New Jersey Department of Environmental Protection (NJDEP) to identify an area that would be suitable for offshore wind development, and concluded that a 418 square nautical mile area between Avalon, New Jersey and Barnegat Light, New Jersey would be appropriate. The boundary of the potential development area runs for a distance of 45 nautical miles between Barnegat Light to Avalon, and begins 7 nautical miles from the coastline and extends 23 nautical miles seaward.

On April 20, 2011, BOEMRE issued a Call for Nominations, which sought responses from companies interested in leasing portions of the identified development area for the purposes of developing and constructing wind farms.

On June 10, 2011, the NJDEP announced that 11 companies responded to the Call for Nominations. The responding companies set forth potential wind farm development projects that ranged in size from 350 megawatts to 3,000 megawatts. The companies responding to the Call for Nominations included Offshore MW, LLC; Neptune Wind, LLC, Garden State Offshore Wind Energy I, LLC; Bluewater Wind New Jersey Energy, LLC; TCI Renewables, Inc.; Mainstream Renewable Power; enXco Development Corp.; US Wind, Inc.; New Jersey Offshore Wind, LLC; Fishermen’s Energy of New Jersey, LLC and Iberdrola Renewables, Inc.

BOEMRE will evaluate the qualifications of the 11 responsive companies and review the proposed wind farm developments in order to reach a final decision as to whether to lease portions of the continental shelf for development. If BOEMRE determines that leasing will go forward, it will employ a competitive bidding system to award the leases.

The potential offshore wind development projects in New Jersey would be large scale and could provide significant work opportunities for local contractors. We will continue to monitor the evaluation process and update you on the decisions.

Last week, Pennsylvania’s House Labor and Industry Committee considered PA House Bill 1602  (HB 1602). Construction industry experts, including Cohen Seglias’ own Jason A. Copley, critiqued the bill in testimony presented at a televised public hearing. If approved, HB 1602 would require additional notice provisions and reduce a claimant’s time to file a lien from six to four months.

What is HB 1602?

Under HB1602, any subcontractor, contractor, or second tier subcontractor who fails to provide the newly proposed Notice of Furnishing within 20 days after first performing work or rendering services or material at the property could forfeit its lien rights. The Notice of Furnishing requires disclosure of, among other things, the estimated price of the labor, materials, and tools furnished. If approved, HB 1602 would also require owners, owner’s agents, and/or general contractors to file and post at the property a Notice of Commencement disclosing the true owner of the property, among other things.

Possible Effects on the Construction Industry

House Bill 1602 has negative implications for the construction industry as a whole because:

1. The lien law exists to protect all contractors and make sure that they get paid for work when unscrupulous owners fail to pay their bills. Making any changes that curtail those rights must only be done with great caution and to correct a "wrong" resulting from the current law. In this regard, the reduction of time to file from six to four months works to the detriment of both subcontractors and general contractors in that it would inadvertently increase the number of lien filings and prevent the amicable resolution of claims as parties rush to satisfy the shortened deadline.

2. Some subcontractors and second-tier contractors, that the lien law is designed to protect, will likely unwittingly forfeit their lien rights for the labor and materials they supply on projects by failing to satisfy the new Notice of Furnishing requirement.

3. The current Mechanic’s Lien Law is intended to protect contractors and promote economic growth by providing needed protection to contractors who provide labor and materials on projects. It is counterintuitive to the law’s purpose to restrict its scope and application by requiring notice prior to a dispute. Also, since the amendments in 2009, no floodgate has opened with respect to the filing of liens. Therefore, there is no economic or governmental interest to support an amendment to more narrowly tailor the application of the current version of the Mechanic’s Lien Law.

4. The potential for a general contractor’s forced “double payment” (once to the subcontractor and again to a supplier or sub-subcontractor) should be otherwise avoided by limiting the liability of general contractors in relation to the amount they have already paid under a contract, similar to the defense owners enjoy pursuant to Section 1405 of the current Mechanic’s Lien Law. In addition, a "fund" could be established by an amendment to set up a trust fund mechanism like exists in New Jersey, which would provide for unpaid second-tier subcontractors to receive a pro rata distribution of unpaid funds.

5. Only 21 states have currently enacted legislation similar to the notice provisions proposed in HB 1602. Also, given that Pennsylvania law already offers other avenues of protection for owners and general contractors, the additional protections proposed by HB 1602 are unnecessary.

Cohen Seglias will continue to monitor HB 1602 and any amendments. If you have any questions about HB 1602 or the June 13, 2011 public hearing, please contact Jason Copley at jcopley@cohenseglias.com or Jennifer Horn at jhorn@cohenseglias.com, 215-564-1700.

The Philadelphia Water Department (PWD) has enacted a new method for charging customers for Storm Water Management Services (Services). It is important to understand the new rating system, as it could significantly impact all property owners in Philadelphia, especially nonresidential property owners, by charging considerably higher rates.

Terms you Need to Know

In the past, the charge for Services was based on an account's meter size. As of July 1, 2010 the PWD began calculating the Services on an individual account basis, using the square footage of the Gross Area of the property and square footage of the Impervious Area of the property. PWD defines the Gross Area (GA) as the entire property area contained within the legally described boundaries of a property, not including portions of sidewalks that are in the public “Right-of-Way.” PWD defines the Impervious Area (IA) as the total square footage of any hard surface area, including buildings, any attached or detached structures, paved or hardscaped areas, and compacted dirt and gravel that either prevent or restricts the absorption of water into the soil, thereby causing water to run off the surface.

For each property that is 5,000 square feet or greater, IA will be calculated by using Philadelphia’s Geographic Information System, along with ortho-images of each property. For undeveloped properties that are less than 5,000 square feet, the IA is 25% of the GA of the property. For developed properties that are less than 5,000 square feet, the IA is 85% of the GA of the property.

Calculation of Charges

The new rate structure will be phased over a four year period as follows:

Under the new rate structure, the GA factor and IA factor are determined by dividing the GA and IA of a property by 500 and rounding up to the next whole unit. Each unit is then multiplied by the unit charge, which for example, the period from July 1, 2011 through June 30, 2012 will be 0.528/500 square feet per month for GA and 4.169/500 square feet per month for IA.

Available Credits

PWD offers a variety of ways to receive credits. There are three categories of credits:

• Impervious Storm Water Credits (IA Credits)
• Gross Area Storm Water Credit (GA Credit)
• National Pollutant Discharge Elimination System Industrial Permit Storm Water Credit (NPDES Credit)

Storm water credits involve the utilization of methods such as green roofs, porous paving, rain gardens and storm water harvesting, including: irrigation, fire suppression systems, toilet and urinal flushings, and custodial uses.

Even if a property receives the maximum amount of any available individual credits and/or combination of credits, it will still be subject to a monthly minimum charge. Credits will be in effect for a four year period and can be renewed so long as the renewal application is made at least 30 days prior to the expiration of the credit. The effective date for a credit is the first day of the month when the fully completed credit application and all supporting documents were filed.

Appeals

Property owners may appeal Services charges for technical accuracy, such as:

• Incorrect parcel
• Inaccurate property classification
• Inaccurate GA
• Inaccurate IA
• Residential side yard
• Water and Sewer Rents

Before property owners can submit an appeal, their water and sewer bill must be paid in full and their account must be up-to-date.

The new rate structure is anticipated to be costly for nonresidential property owners in Philadelphia. All property owners, developers and contractors affected by the changes should study the rate structure and be sure to identify how your future buildings plans may be altered and also how to appeal and/or mitigate the charges.

The attorneys at Cohen Seglias are prepared to advise companies regarding how these new rates will affect them, as well as how they can plan for future changes. For more information about the new rate structure, or other real estate issues, please contact Lonny S. Cades at (215) 564-1700 or lcades@cohenseglias.com, or the Cohen Seglias attorney with whom you normally consult.

Pennsylvania:

PNC Financial Services Group (PNC) is moving its headquarters to Pittsburgh. PNC, which is the largest bank in Pennsylvania, plans to build a $400 million “green” office structure in downtown Pittsburgh, which will create 2,500 construction jobs. The new skyscraper, which is to be about 40 stories high and 800,000 square-feet, will be PNC’s largest building in Pittsburgh. Currently plans include 300 underground parking spaces and street level retail. The building will be complete with green rooftops.

Maryland:

Maryland’s National Harbor is adding a “$100 million retail outlet as part of a plan by its developers to expand the convention and resort complex into a one-stop shop for visitors.” The outlets, to be built on 40 acres of land, are expected to house 80 designer stores.

The National Harbor is quickly on the way to becoming a must-see attraction. The National Children’s museum has announced plans to relocate to the harbor . Plans to break ground on a new 140,000 square-foot building to house the museum are expected to start later this year.

New Jersey:

New Jersey’s Xanadu Mall is about to get a $1.5 billion face lift. New Jersey Governor Chris Christie announced plans to renovate and expand the mall, including a “recladding of its multicolor exterior.” Refurbishing the mall, a 2.4 million square-foot structure, will create over 9,000 construction jobs. Christie who had previously dubbed the mall the states “ugliest” building, has also announced a name change to the structure. Going forward the new mall will be known as “American Dream Meadowlands.”

The “Job Applicant Fairness Act,” (the Act) signed into law on April 12, 2011, prohibits most Maryland employers from using credit reports and credit histories as a means of determining hiring and retention. Generally, employers are prohibited from using an applicant’s or employee’s credit report or credit history for the purpose of denying employment, discharging an employee, or determining compensation or other terms, conditions or privileges of employment.

Importantly, the Act does not affect employers that do not obtain credit information on employees and applicants. Employers may continue to conduct background checks, criminal record checks and obtain consumer reports that do not include credit information, subject to the requirements of the Fair Credit Reporting Act and other laws.

The Act exempts several positions where the use of credit information has been deemed “substantially job-related.” Specifically, the Act exempts the following positions:

• Managerial positions involving direction or control of part or all of the business;
• Positions provided expense accounts or corporate credit or debit cards;
• Positions involving access to personal information of employees, customers or the employer;
• Positions involving access to the employer’s protected trade secrets and intellectual property, or confidential business information; or
• Positions involving money-handling (authority to issue payments, collect debts, transfer money, or enter into contracts).

Also, certain categories of employers are exempt from these restrictions. Financial institutions and affiliates, investment advisors registered with the U.S. Securities & Exchange Commission, and employers legally required to obtain credit checks or histories for employment purposes, are not subject to the above restrictions.

Maryland employers must conform their employment policies to these requirements, which are effective as of October 1, 2011. Employees have no private cause of action for violations of the Act, but may file complaints with the Commissioner of Labor & Industry. Employers may be subject to monetary fines for violating the Act.

For questions regarding compliance of the Act, please contact Melissa Angeline.

A recent study of Pittsburgh’s David L. Lawrence Convention Center (DLCC) showed that the building has been “wasting energy” for years. The finding has brought much criticism from taxpayers.

The study performed by the Green Building Alliance, and funded by the Sports & Exhibition Authority (SEA) and The Heinz Endowments, found that the electrical system in the DLCC has resulted in $70,000 to $100,000 in wasted-power penalties each year since 2003- a cost that has been passed on to taxpayers. While taxpayer-funded power penalties are undesirable on any public building, it is particularly egregious in this case because the DLCC is a LEED Gold rated building that was designed to be energy efficient.

Upon a review of the extra electrical charges from Duquesne Light Company, it was determined that the 1.5 million square foot DLCC was not running as efficiently as possible and that six to eight percent of the annual bill, or $1.27 million was for wasted electricity. Mary Conturo, Executive Director of the SEA, which owns DLCC, explained that the SEA was aware of the problem and undertook a study to cost-effectively address the waste. The eventual solution was to purchase two large capacitors. The capacitors get rid of inactive energy in order to make the electrical system more efficient. Conturo explained that “[l]arger buildings routinely have these power factor penalties unless they have these capacitors”. Of course, the solution begs the question as to why the capacitors were not included in the initial design of the electrical system. Once installed, it will only take approximately three years of power savings for the capacitors to pay for themselves.

The study of the DLCC raises far-reaching questions related to the LEED rating system: what is the correlation between a LEED rated building and an energy efficient building and whether operation and maintenance testing should be required in order for buildings to maintain their LEED rating.

Cohen Seglias Partner Lane F. Kelman contributed to this post.

It is hard to dispute that the past three years have been difficult for West Virginia's construction industry, and so far 2011 hasn’t seen much improvement. Employment in the construction industry is down approximately 10% this year over last year, according to The Contractors Association of West Virginia Executive Director Mike Clowser, "We don't see a lot of improvement for 2011. We're hoping to see a greater upturn in 2012."

Clowser pointed out there are areas of growth in West Virginia, including Morgantown (West Virginia University) and Fairmount (High Tech Corridor), where contractors and construction crews are working non-stop. But he says the Eastern Panhandle, once a hot bed of construction, and many other areas of the State, still haven't recovered from the housing bust and the recession.

However, there have been several recent signs of improvement in the West Virginia construction industry, mostly in the infrastructure, education and energy sectors. These include:

• The U.S. Department of Agriculture awarded more than $1 million for water and sewer projects in Logan and Putnam counties. The funds are part of an $840,000 grant and $230,000 low interest loan. The projects will replace sewer collection lines for certain customers and also build new lines to serve hundreds of additional households. The Department of Agriculture awarded the loan through its rural-development program, which provides funding to rural communities across the country for infrastructure projects.
• Developers are ready for groundbreaking at the Mingo County site of the proposed TranGas Development Systems, LLC coal-to-gasoline plant. The $4 billion Adams Fork Energy plant, which will be the largest of its kind in the world and the first of its type in the United States, will produce 756,000 gallons of gasoline from coal each day. Construction is expected to take four years and create 3,000 construction jobs.
• Acting Gov. Earl Ray Tomblin's administration has doubled the number of low-traffic roads the state highway department intends to pave in 2011. According to the Department of Transportation spokesman Brent Walker, a new $11 million program, called the Secondary Road Renovation Program, will target roads that are traveled by 500 or fewer vehicles per day. Last year, before the secondary roads program existed, the state paved about 450 miles of low-traffic roads. "It's our hope that we'll be able to repair, fix and pave about 1,000 miles around the state that would not normally be a part of the paving program," said Walker.
• New River Community and Technical College intends to construct a $13.5 million administration building on its Raleigh County Campus. The college unveiled plans for the 55,000-square-foot building Friday. New River says it's also going to renovate an 18,000-sqare-foot building on its Greenbrier Valley Campus in Lewisburg.

In West Virginia’s case, the numbers may not be showing the whole picture. While construction is down 10% from last year, there are a number of new construction projects planed throughout the state that may be the key to turning things around.

Cohen Seglias attorney Robert Ruggieri contributed to this post.

For an increasing number of contractors, survival in the current economy has resulted in the need to find and secure work in other states. The migration of contractors to neighboring states is apparent throughout the country. Besides the work itself, benefits of an expanded geographic footprint include a broader client base, thereby creating mutually beneficial relationships.

For a complete breakdown on which states are seeing the biggest increases in cross border work, please visit, The Construction Blog, which is a dedicated to construction software technology.

Construction Technology Facilitates an Expanded Geographic Footprint

Recent advances in technology are accelerating the migration of contractors to neighboring states. Such technology includes, but is not limited to:

• Online Plan Rooms - This software aids contractors looking for jobs across state lines. A contractor can browse by project type, trade or location to find upcoming construction projects.
• Bid Management Software – This program acts like a “virtual broker” and assists contractors in the bidding process, by connecting buyers with sellers.
• Web Based Project Management Software – This technology allows for real time monitoring of construction projects.
• Onscreen Takeoff and Cost Estimating - This tool allows contractors to build cost estimates for projects happening in other states.
• Building Information Modeling (BIM) – BIM brings a project to life, through 3D, 4D and 5D models.

Contractors seeking an expanded geographic footprint should be aware of the upgraded technology as a means of facilitating work across borders.

New Jersey Turnpike officials recently announced that they expect to advertise approximately $800 million in Turnpike related construction projects to be completed by February 2012. The projects will include road widening, bridge deck, resurfacing, sign structures, and other types of road upgrades. Next year, New Jersey Turnpike officials anticipate advertising approximately $1 billion in similar work.

For a complete list of planned projects, please click here.

On April 8, 2011, the Commonwealth Financing Authority announced its approval of $6.5 million in new alternative and clean energy grants. According to C. Alan Walker, acting Secretary of the Department of Community and Economic Development, these grants will help fund the utilization, development, and construction of 13 new alternative and clean energy projects in 10 counties throughout the Commonwealth.

Grants

Texas-based Accelergy Corp. will receive a $1.3 million grant towards a $5.5M coal liquefaction validation unit, coal and bio-liquids unit and photo bioreactors at the Pittsburgh Applied Research Center in Harmar Township, Allegheny County.

Power Source, LLC, located in Wayne County, will be issued a $2 million grant for the research and development of a sodium sulfur battery that will have six times the energy storage capacity and eight times the lifespan of a standard lead acid battery.

Other notable grants will be extended to the following:

• Pennsylvania State University for the design, procurement and installation of Smart Grid research and development facilities at the Philadelphia Navy Yard in Philadelphia County;
• The Tamaqua Area School District for the purchase and installation of a geothermal system at three school buildings in Tamaqua Borough and West Penn Township, and for future energy efficient upgrades for five school buildings in Tamaqua Borough, Rush Township and West Penn Township;
• Apple Shamrock Dairy Farm LLC for the purchase and installation of a 750 kW wind turbine in Steuben Township, Erie County; and
• Clean Green Hydro, LLC for the installation of 25 kilowatt in-line turbines at three Greene County mine water treatment plants:AMD Reclamation Inc. and Dana Mining Company of Pennsylvania LLC., both in Dunkard Township, and Duquesne Light Co.’s Warwick Mine in Monongahela Township.

In total, these alternative and clean energy program grants are intended to yield about $40 million in private investments in the Commonwealth, and will help citizens, businesses and local governments save nearly $127,000 each year on their energy bills.

For further details on the 13 alternative and clean energy and renewable energy approved projects, or for information on how to obtain funding through the Commonwealth Financing Authority, visit www.newpa.com.

Cohen Seglias Partner Lane F. Kelman contributed to this post.

On April 12, 2011, the Pennsylvania Senate voted to pass House Bill 377 (HB 377). The Senate's version of the bill contained some changes, and HB 377 was sent back to the House for a concurrence vote. A day later, the House voted to approve the bill as it came out of the Senate. HB 377 is now on its way to Pennsylvania Governor Tom Corbett for signature.

HB 377, if enacted, will remove the residential sprinkler mandate from the Uniform Construction Code for single- and two-family homes that became effective as of January 1, 2011. It would also require that builders provide homebuyers with the option to install a sprinkler system and inform them of the benefits of sprinklers. If the homebuyer opts not to install sprinklers, the home must be built with extra fireproof material on the floor boards in order to slow the spread of fire. The home building industry highly supports HB 377, while firefighters and insurance professionals are generally opposed to it.

We will keep you posted on the progress of HB 377, but as always please contact us if you have any questions or need further information.

According to the Baltimore Business Journal, downtown Baltimore’s office vacancy rate is, amazingly, about 19%. A new task force, co-chaired by  J. Kirby Fowler, President of Downtown Partnership of Baltimore Inc. and Colin Tarbert, Deputy Director of the Mayor's Office for Economic and Neighborhood Development, aims to combat this ballooning rate. Contractors working in downtown Baltimore should be aware of this task force and the steps it is taking to build-up the downtown area.
Baltimore Mayor Stephanie Rawlings-Blake recently commented that the newly created “Downtown Task Force” would be “developing strategies to strengthen the downtown office market by attracting new business, stimulating job growth and spurring new investment.”

In describing the Task Force, the mayor noted:

While focused primarily on office vacancy, the overarching goal of the Mayor’s Task Force was to develop recommendations that will also serve as part of a larger strategy aimed at strengthening Downtown with a new vision for the future. That vision includes Downtown becoming an ever-evolving mixed use neighborhood, which includes business, a diverse population of residents, hotels, thriving retail and restaurants, and expanding anchor institutions.

The Task Force had three main goals in mind while conducting their background research, which were to:

• Review past, present and anticipated office market trends;
• Determine short-term and long-term strategies to reduce vacancy rates, attract new business, and facilitate the growth of existing companies; and
• Identify opportunities for new development and/or the repositioning of underutilized office properties.

Based on their findings, the Task Force has made five recommendations for Baltimore, including:

1. Collectively market downtown's office space by combining the efforts of Downtown Partnership, the Economic Alliance of Greater Baltimore, city agencies and private businesses, and clearly define which role each group should play in those efforts;
2. Review and evaluate the effectiveness of federal, state and city incentives, and develop new ones, to help attract and keep businesses downtown;
3. Work with downtown businesses and institutions to identify service providers those groups work with that may also want to relocate to the city;
4. Establish a standing committee of federal, state and city agencies to identify what their future office needs will be and how downtown's office buildings can accommodate those needs; and
5. Create a plan, including financial incentives, to help downtown building owners convert obsolete office space into apartments or mixed-use projects.

What does this mean for Baltimore Builders?

The final recommendation – conversion of obsolete office space into apartments - has the most impact on contractors. High priority buildings recommended for conversion into mixed-use spaces are:

1. 10 Light Street, The Bank of America Building;
2. 2 Hopkins Plaza, PNC Bank Building;
3. 114 East Lexington Street, Provident Bank Building;
4. 225 North Calvert Street, Bank of America Building;
5. 10-12 North Calvert Street, The Equitable Building; and
6. 10 North Charles Street, Johns Hopkins Downtown Center.

The Task Force also intends to implement an incentive program which would primarily focus on the conversion of properties from an office use to a residential use, either owner-occupied or rental. Good news for contractors looking to participate in Baltimore’s downtown revitalization.

The Baltimore Business Journal reported on March 14, 2011, that, “Howard County (Maryland) is recruiting small and minority-owned businesses to help build the state’s $115 million “One Maryland Broadband network.”

The proposed One Maryland fiber optic network will interconnect community anchor institutions across 10 jurisdictions in Central Maryland, uniting rural, urban, and suburban communities in one contiguous network across the State… To summarize, the One Maryland Broadband proposal will spur economic development and job creation, coordinate and enhance public safety communication, and create a fiber backbone and necessary redundancy for homeland security purposes that is interconnected amongst local jurisdictions and State public safety entities – a feat never before accomplished in Maryland.

When completed, One Maryland Broadband would service:

• 500 schools;
• 30 colleges and universities;
• 160 fire/police stations and 911 call centers;
• 50 libraries;
• 50 hospitals and health clinics; and
• 25 transit centers, train stations, airports, and ports.

Howard County is currently compiling a short list of local minority-owned businesses to recommend to contractors to hire from for the project. To be considered, applicants must be businesses that have “three years of experience in outside plant construction, three references of performance over the three years, and good standing with the Maryland Department of Assessments and Taxation.”

Apply Today

The initial due date for applications is today, Thursday, March 17th. Applications submitted after today will be reviewed on a rolling basis. To download a copy of the application, please visit the Howard County website.

According to a recent study released by McGraw Hill Construction, “Contracts for future commercial construction in the Baltimore-Towson Metropolitan statistical area for January 2011 were up 72 percent when compared to the same month in 2010.”

In an article that appeared on Citybizlist Maryland this week, it stated that, “January 2011 saw future construction contracts top $41 million, a 72 percent increase over January 2010. Although residential construction contracts fell 17 percent, total building in the Baltimore region topped $103 million in January 2011, a five percent increase over the same month in 2010.”

The statistics released cover only Maryland’s Baltimore-Towson area, which consists of Anne Arundel, Baltimore, Carroll, Harford, Howard and Queen Anne’s counties.

The recent surge in activity in Baltimore seems to mirror the experience of the rest of the country. As Anirban Basu, Chief Economist for the Associated Builders and Contractors, Inc., stated in a Q&A conducted by Construction Law Signal on January 24, 2010, “In terms of U.S. production, we are now more than one and a half years into the current economic recovery… some construction indicators, such as the architecture billings index, have begun to show signs of life.”

Governor Martin O’Malley recently announced that through the Sustainable Communities Tax Credit Program, ten different projects throughout Maryland received grants totaling $11.1 million towards sustainable construction.

O’Malley said the ten projects, “will help create 740 construction jobs in projects that will revitalize communities and promote green building practices around the state.” He continued to explain, in the State issued press release, that the Sustainable Communities Tax Credit and its predecessor, the Historic Tax Credit, have invested more than $358 million in Maryland revitalization projects in the past 15 years, supporting 15,000 jobs and revitalizing communities.

The ten winning projects were selected from 36 applications, who sought approximately $40 million in state funds.

The projects and their state grants are:

• Sheppard Pratt Gatehouse in Towson: Renovation of the gatehouse to create two guest apartments for the Sheppard Pratt Health System, $232,200.
• Oella Community Hall in Oella: Conversion of a community center to office space, $100,000.
• A. Hoen Lithograph plant in Baltimore: Conversion of a vacant factory to office and commercial space, possibly a "healthy foods" commissary for the city school system, $3 million.
• Algonquin Building in Baltimore: Renovation to convert building from offices to 56 apartments, $1.8 million.
• Clifton Park Mansion in Baltimore: Conversion into a community center, $1.5 million.
• Crown Cork and Seal Machine Shop in Baltimore: Conversion of a vacant factory to an art- and design-oriented high school, $3 million.
• Raffel Building in Baltimore: Conversion of a vacant factory for residential use, $348,900.
• Buildings at 9-11 and 13-17 W. Antietam St. in Hagerstown: Renovation of vacant commercial properties for use as apartments, $284,000.
• Building at 101 S. Potomac St. in Hagerstown: Conversion of a vacant commercial building into apartments, $289.900.
• Oxford Community Center in Oxford: Conversion of a former school to a community center, $625,000.

New Jersey Governor Chris Christie recently enacted legislation revising the New Jersey Construction Lien Law, which was last amended in 1994. The amendments are effective immediately, and include changes to critical timing, definitional, and enforcement requirements.

Please note that the changes affect only commercial and private projects and have no bearing on the Municipal Mechanics Lien Law, which pertains to only government projects.

The changes to New Jersey’s construction lien law include, but are not limited to, the following:

The Time You Have for Filing Residential Construction Liens Has Changed

Residential construction claimants must file a Notice of Unpaid Balance (NUB) and Right to File Lien within 60 days from when the claimant last performed work or supplied materials on the project. Within 10 days after filing the NUB, the claimant is required to serve a demand for arbitration for the purpose of determining the amount of the lien claim. This time may only be extended upon consent of the parties and arbitrator. Within 10 days after the arbitrator's determination, but within 120 days from when the claimant last performed work or supplied materials, the claimant must record the lien claim.

Multiple Liens Against the Same Residential Project Are Addressed

Parties aggrieved by lien claims relating to the same construction project may, under the new law, be joined in a single construction lien arbitration proceeding in order to avoid inconsistent arbitration awards. The new law also requires that, if possible, the same arbitrator determine all such claims - even if joinder is not possible. In addition, the arbitrator must consider the outcome of all previous proceedings relating to the same construction project in rendering her determination.

You Must Use New Statutory Forms for the NUB, Lien Claim, and Amended Lien Claim

These new forms clarify the manner in which a claim is calculated. In addition, standard forms of affidavit to summarily discharge a lien claim and standard forms for the bond used to discharge a construction lien claim are provided.

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The Lancaster County Board of Commissioners announced on January 26, 2011, that they passed an ordinance banning the use of project labor agreements (PLAs) “on all county-funded construction projects.” With the passage of Ordinance 99, all Lancaster County projects will now have open bidding, instead of exclusively being available to only union contractors. Of course, union workers will also be able to bid on projects, but the hope is that Ordinance 99 will even the playing field.

Commissioner Scott Martin, of the Lancaster County Board of Commissioners, says:

As I see Project Labor Agreements starting to be utilized in other areas of the Commonwealth, I believe it is important that this action be taken to preserve fair and open contracting for government projects, ensure that we attain the most competitive costs for taxpayers and to offer a process that doesn’t exclude 85% of the workforce from competing for government projects.

This marks the first time that PLAs have been banned in Pennsylvania, at the county level. With this new ordinance in place, it should help to guarantee that local taxpayers receive the best construction work at the most competitive price.

The Delaware Department of Transportation (DelDot) recently filed a lawsuit for $19.6 million in damages against Florida based engineering contractor Figg Bridge Engineers (Figg) and its engineering subcontractor MACTEC Engineering (MACTEC). The suit alleges that the two contractors provided inaccurate and incomplete information regarding the geotechnical evaluation of the embankment surrounding the Indian River Inlet in Sussex County.

The Project

The existing bridge was originally built in 1965, and is in need of repair due to tidal erosion that is threatening the bridge’s support system.

Figg's original plans called for traffic lanes that would approach the inlet and bridge along sharp-sided, heavily reinforced earthen slopes rising to a height of about 50 feet on either side of the river crossing.

MACTEC was hired in 2003 to study land on either side of Indian River Inlet and design a replacement for the current bridge, which has been deemed unsafe.

Problems with the Project

DelDot originally collaborated with Figg and MACTEC on the project to refurbish the bridge, but the project had to be cancelled because the, “underground soils supporting fill dirt on the bridge approach ramps were settling slower and deeper that expected, making the ramps unstable.”

DelDot hired an outside consultant to evaluate the project and find out what was going wrong. Their findings provided the groundwork for the lawsuit.

The suit, filed in Sussex County Superior Court, claims that the, “the studies done by MACTEC were inadequate, resulting in tilting, twisting, bulging and sagging of the embankments as they settled.” It goes on to claim that “MACTEC did not account for the complex sand and clay layers beneath the site and failed to inform DelDOT of signs the embankments were unstable.”

Carolann Wicks, DelDot secretary, claims that, “investigations have determined that there was nothing wrong with the construction of the “mechanically stabilized earth” walks supporting the embankments, and that the problem was improper analysis of the underlying soils.” One embankment that was expected to drop only 36 inches, actually dropped 74.

State officials said they were forced to sue after being unable to reach an out-of-court resolution that is fair to taxpayers.

Response to the Lawsuit

Figg maintains its innocence in the project, “noting that Delaware's complaints are focused on MACTEC's performance, and not any design or other engineering work performed by Figg."

MACTEC denies the allegations in the lawsuit citing, among other things, DelDOT’s actions, project management, and decision-making as factors that led to increased costs for the bridge.

Another company has been hired to build the bridge just west of the original site, which is scheduled to open later this year.

A controversial bill, know as “LS Power Bill” has recently put New Jersey Governor Chris Christie under some pressure. The bill, A. 3442, is a reaction to regional power-grid operator PJM Interconnection's (PJM) reliability pricing model (RPM) that is designed, among other things, to encourage the construction of electric generation through incentive rates. The bill says the state must take action to ensure that enough electric generation is available in the region because the incentives under the PJM’s model have failed.

The goal of A. 3442 is to establish a long-term capacity agreement pilot program to promote construction of qualified in-State electric generation facilities.

Bill Supporters

The legislation would allow for a guaranteed long-term income for developers of several large power plants, and the bill’s supporters claim that it would significantly lower energy rates for residents.

“The guarantees were necessary to obtain financing to construct the 640-megawatt plant along the Delaware River, which would cost from $800 million to $1 billion,” said Tom Hoatson, director of regulatory affairs for LS Power.

If approved, the new plant would create construction jobs for 500 people, and 25 permanent jobs.

Bill Opponents

Opponents of the bill, which include Exelon Corp., say it is an “anticompetitive sweetheart deal that will cost consumers in the long run.”

Challengers claim a move like this would “set the clock back” years, and undo efforts to make electrical-power markets more competitive.

George M. Waidelich, vice president of energy operations for Safeway Inc., says, “we cannot afford an energy surcharge to guarantee billions of dollars of revenue to a few select developers.”

Next Steps

Currently, the bill is under review with Governor Christie. Officials expect that the Governor will likely sign the legislation after his office has secured amendments that address concerns about the bill’s potential negative impact on competition in the electric generation market. The Governor’s office was consulted in the last draft of amendments.

The developer of 10 Rittenhouse, the luxury Philadelphia condominium building with 33 floors and units priced from $600,000 to $15 million, recently filed for bankruptcy protection under the court’s Chapter 11 procedures. In doing so, the developer, Philadelphia Rittenhouse Development L.P., prevented the senior lender, Istar Tara L.L.C. (Istar), from placing the property in receivership. Istar is said to have invested $251 million in the project. Unit sales have helped reduced the amount owed to about $190 million.

10 Rittenhouse is comprised of 135 condominium units, retail and restaurant space. Of the 135 units, to date only about 40 have been sold.

"There is no risk" to the current unit owners, said Steven H. Shepsman, executive managing director of New World Realty Advisors in New York, which is assisting the developer in its financial restructuring.

10 Rittenhouse is not the only troubled condominium project linked to Istar, as they also served as the senior lender for the Aria, a condominium building located at 1419 Locust Street. When Aria’s developer defaulted on its loan, Istar petitioned for and achieved the receivership of that building. This move resulted in sales of Aria units being halted for more than a year.

Smart contractors now more than ever must be vigilant about preserving their rights to mechanics’ liens. Lien rights provide another avenue of protection if and when payment is not made for work performed. Contractors should beware however, when performing work or supplying materials on Pennsylvania projects that cover multiple plots of land.

Recently, a contractor in Philadelphia County performed concrete and masonry work on a strip mall that covered multiple plots of land, with multiple owners. In court, this contractor’s attempt to lien the project was unsuccessful because the contractor filed two liens for the same work against both plots and did not apportion the liens based upon the improvements made to each plot.

The practical message here is that Pennsylvania contractors who work on projects that span multiple land plots and involve more than one owner should be mindful of exactly where they are performing their work, and where the materials they supply are ultimately installed and/or deposited. The statutory expectation under the Pennsylvania lien law in this multiple-plot circumstance is that work performed on each plot is specifically apportioned. This means that the contractor must account for and divide the work and associated costs according to each plot of land where the work occurred.

Pennsylvania contractors would be well-advised in this multiple plot situation to maintain specific daily reports that delineate which work is being performed on which plot of land. Additionally, maintenance of delivery tickets and shipment receipts that specifically note where particular materials are installed is helpful.

Building owners in the City of Philadelphia had better start paying closer attention to what’s on the outside. Earlier this year, Mayor Michael Nutter signed an ordinance -- Periodic Inspection of Exterior Walls and Appurtenances of Buildings -- amending the City’s Building Construction and Occupancy Code, and mandating periodic inspection and repair of building exteriors. The ordinance also requires owners to file inspection reports with the Department of Licenses and Inspection (DLI). Affected buildings are defined by the ordinance as all buildings that are six stories or higher and all those that have any appurtenances greater than 60 feet in height. While the ordinance could make life more difficult for building owners, it will create opportunities for contractors seeking work in Philadelphia.

Ordinance Requirements

Pursuant to the newly enacted ordinance, the inspections must be conducted by a “Professional,” defined as a Pennsylvania “licensed Professional Engineer experienced in the practice of structural engineering or a licensed Registered Architect knowledgeable in the design, construction and inspection of building façades.”

The deadlines to complete the first inspections and reports are as follows:

• June 30, 2011-Buildings constructed prior to 1950 and those with a construction date that cannot be determined
• June 30, 2012-Buildings constructed between 1951 and 1970
• June 30, 2013-Buildings constructed between 1971 and 1980
• June 30, 2014-Buildings constructed between 1981 and 1990
• June 30, 2015-Buildings constructed between 1991 and 2005
• For buildings constructed since 2005, the first inspection and report are due 10 years after the issuance of the certificate of occupancy

After the initial round of inspections and reports, inspections must be conducted and reports filed on a 5 year cycle. Owners are responsible for retaining their reports and keeping them readily available for inspection by the DLI. Violations of the ordinance are considered Class III offenses and violators are subject to a fine of $2,000 per violation.

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The Pennsylvania Superior Court has decided to reconsider its own recent ruling that made information considered by an expert fair ground for full discovery by other parties in the lawsuit.

Barrick v. Holy Spirit Hospital

On September 16, 2010, in the case of Barrick v. Holy Spirit Hospital, the Pennsylvania Superior Court decided that emails and letters between a defendant’s litigation expert and the defendant’s lawyer were “discoverable,” i.e. they had to be turned over to the other party in the lawsuit. These letters and emails included the lawyer’s trial strategies and tactics. Such communications were previously considered privileged and confidential attorney work product and therefore not subject to discovery.

The basis for the Court’s ruling was that all parties to a lawsuit should be entitled to discover the extent of a lawyer’s influence over an expert’s opinions in order to test the truthfulness of the expert’s conclusions, and to determine whether the lawyer directed the expert to reach certain conclusions, to disregard certain facts or take other facts into consideration.

The Superior Court’s landmark decision has come under severe fire during the few months following its rendering. The decision has been criticized for flying in the face of customary legal practice in Pennsylvania, and bucking the trend in federal courts that such communications are protected from discovery. In fact, the Federal Rules of Civil Procedure, which govern cases filed in federal court (as opposed to state court where the Barrick decision was made), were recently amended to specifically protect the exact same type of communications from discovery.

Impact of Decision

The Barrick decision, should it stand, will completely change the practice lawyers and litigation experts have been operating under: that communications between litigation experts and lawyers is work product that is not subject to discovery. The decision will make a lawyer think twice before bouncing ideas off an expert, and possibly prevent him or her from making comments or asking questions about a draft expert report, for fear that someone would obtain those communications and accuse the lawyer of writing the expert’s report for him.

Reconsideration of Decision

In an unusual change of events, the Court recently withdrew its decision and is going to hear re-argument on the case “en banc”, meaning that a larger panel of judges (up to nine) will hear the argument and participate in the decision as opposed to only the traditional three judge panel. A re-argument date has not been scheduled.

Although the Barrick case was a personal injury case, the Superior Court’s ultimate ruling will critically impact construction litigation cases as well. Experts, including architects and engineers, are frequently used in construction litigation cases and are often critical in developing and proving a party’s claims or defenses. Should the Barrick decision stand, attorneys will have to carefully manage their communications with experts to ensure that trial strategies, tactics and discussions regarding the strengths and weaknesses of their clients’ case are not subject to discovery.

We will continue to monitor the Superior’s Court’s argument schedule, and will keep readers advised on this important matter.

Pennsylvania Governor Ed Rendell announced Monday that new state investments for Warren and Erie counties have been approved. The new projects will receive $45 million in state funding and $68 million in private funding and will create more than 400 temporary construction jobs. In addition, the new projects will create more than 325 permanent jobs for local residents.

"It's so important to make smart investments to spur economic development. When the state invests in a project, private companies or other organizations match or exceed those funds with their own investments," Rendell said. "These investments are revitalizing communities, creating jobs and opening the door to new opportunities and future growth."

New Projects Include:

• A $7 million investment through the Redevelopment Assistance Capital Program (RACP) into the GAF Bayfront project that will remediate the land where the former GAF Materials Corporation plant was once located. The project will open up new tourism and development opportunities and is anticipated to create 100 permanent jobs and 50 construction jobs. It will leverage $43 million in outside funding.
• A $3.5 million RACP investment to Mercyhurst College that will help develop the Center for Academic Engagement. The new “green” building will house the school’s intelligence studies and hospitality majors and will incorporate laboratory space and state-of-the-art equipment. The project will create 22 permanent jobs, more than 150 construction jobs and will leverage $5.5 million in outside funding.
• A $32 million investment through the Public Improvements Program to help renovate and expand the Louis J. Tullio Arena in Erie. The project will leverage $10 million in private investments and is anticipated to create 145 permanent jobs as well as 125 temporary construction jobs.
• A $2.5 million RACP investment in the Innovate Warren project. This project encompasses a seven-block area and builds on more than five years of work the city has done to revitalize and re-invent the downtown business district and accelerate the opportunity for current and new businesses to prosper. The $2.5 million investment will bring credit and non-credit courses to northwestern Pennsylvania through the development of the Center for Advanced Education, which will teach people about community revitalization and energy. The project will leverage $10.3 million in outside funding and is expected to create 80 temporary construction jobs and at least 60 permanent jobs.

Rendell continued to say that, "Programs like RACP and investments like these have helped to keep Pennsylvania's construction industry going despite the economic downturn. These investments -- and others like it -- that we've made across the state for the past 8 years have helped to keep Pennsylvania's unemployment rate below the national average for 91 of the 94 past months."

A new trend in sports stadiums becoming environmentally friendly has begun to take off. The new Meadowlands Stadium, home to the New York Jets and New York Giants, was built “green” using 40,000 tons of recycled steel and features solar panels and energy-efficient light bulbs. The Consol Energy Center , home of the Pittsburgh Penguins, became the first National Hockey League arena to achieve Gold LEED certification. Most recently, Lincoln Financial Field, home to the Philadelphia Eagles, has unveiled plans to upgrade their stadium to be the, “first major sports stadium in the world to convert to self-generated renewable energy using a combination of onsite wind, solar and dual-fuel generated electricity.”

Jeffrey Lurie, Philadelphia Eagles team owner and CEO said:

The Philadelphia Eagles are proud to take this vital step towards energy independence from fossil fuels by powering Lincoln Financial Field with wind, solar and dual-fuel energy sources. This commitment builds upon our comprehensive environmental sustainability program, which includes energy and water conservation, waste reduction, recycling, composting, toxic chemical avoidance and reforestation.

The Eagles have teamed up with Solar Blue to complete the project. With a completion goal of September, 2011, Solar Blue will “build, install, maintain and operate this new power system that will include approximately 80 spiral-shaped wind turbines, 2,500 solar panels and an onsite dual-fuel cogeneration plant.” The project is estimated to cost $30 million, and will create about 200 local jobs. Additionally, the Eagles stand to save an estimated $60 million in energy costs, as Solar Blue will maintain and operate the stadium’s power system for the next 20 years at a fixed annual price increase in electricity.

Contractors should be on the lookout for job opportunities as other stadiums and arenas around the country renovate to incorporate renewable energy.

The federal government recently denied the state of Delaware’s application for a $22 million grant for a wind turbine manufacturing facility in the Port of Wilmington (The Port). The Port, along with NRG Bluewater Wind (NRG), sought the grant from the second round of the U.S. Department of Transportation’s stimulus-funded transportation investment program.

The Port and NRG still hope to expand the port to include a facility where wind developers could import and assemble wind turbine parts and then haul them out to sea for installation. In the ocean, the wind is stronger and more stable, making it easier to harness power.The overall cost of the planned expansion is $66 million. If awarded the grant, NRG would have matched the federal government’s contribution of $22 million, and Delaware taxpayers would have been responsible for the remainder.

Both the state of Delaware and NRG expressed disappointment over not getting the grant, but remained optimistic about the project moving forward. Alan Levin, Director of the Delaware Economic Development Office said that, “Obviously, we’re disappointed, but I don’t think it changes our desire or our goal to be the major facility for the production and manufacture of [wind turbine] units. . . [i]t just means we've got to go look at other sources, other ways to make this happen.”

Similarly, NRG spokesman Dave Gaier explained that, "Obviously we’d like to have seen the Port of Wilmington get the. . . grant. However, that doesn’t change NRG Bluewater Wind’s project plan nor diminish our enthusiasm to move forward with the Mid-Atlantic Wind Park. We’ll sit down with Delaware state officials at an appropriate time to discuss options with respect to the port."

Presently, Congress is considering funding a third round of grants under the stimulus-funded transportation investment program

We will keep you apprised of any developments regarding the state’s meeting with NRG or funding for the project.

On November 18, 2010, Pennsylvania’s Independent Regulatory Review Commission (IRRC) unanimously approved new standards that will make natural gas wells safer. The new standards were approved just days before a 13,000 gallon fracking fluid spill in Penn Township, Lycoming County. The Department of Environmental Protection (DEP) is currently investigating the spill, which happened at a site owned by XTO Energy.

Department of Environmental Protection (DEP) Secretary John Hanger praised the IRRC vote because the regulations will impose stricter standards on gas well construction, which will make the wells less likely to allow natural gas to seep out and contaminate water supplies or cause safety concerns:

When gas migrates from a poorly constructed gas well through the ground, it can contaminate water supplies or build up to explosive levels in water wells or even homes . . . These strong rules will eliminate or significantly reduce the problem of gas migration from poorly designed or constructed gas wells, as long as the rules are followed or enforced.

The regulations were deemed approved by the House and Senate Environmental Resources and Energy committees, and will next go to the Office of Attorney General for final review and approval. Once all reviews and approvals are obtained, the regulations will go into effect upon publication in the PA Bulletin.

According to the DEP press release, the new standards will require drillers to report production and waste volumes electronically and to submit detailed reports of the chemicals used in the fracking process. Additionally, operators will be required to keep a list of emergency contact phone numbers at the well site and follow a new set of instructions on what steps to take in the event of a gas migration incident. The regulations also include provisions clarifying how and when blow-out prevention equipment is to be installed and operated.

The DEP met with numerous oil and gas operators, industry groups and environmental groups while drafting the regulations to discuss them in detail. The DEP also utilized information obtained from public comments to the regulations, making changes which will improve well safety by preventing accidents. Some of these changes include provisions that:

• Require operators to have a pressure barrier plan to minimize well control events
• Require operators to condition the wellbore to ensure an adequate bond between the cement, casing and the formation
• Require the use of centralizers to ensure casings are properly positioned in the wellbore
• Improve the quality of the cement placed in the casing that protects fresh groundwater

Hopefully, the new regulations will make gas drilling incidents like the Penn Township one less likely to happen in the future. The well-construction standards come on the heels of the news that the Pittsburgh city council recently approved a ban on gas drilling within the city. Although Pittsburgh was the first city to ban gas drilling in Pennsylvania, the vote was just one of many recent moves to curb Marcellus shale drilling within the state.

The New Jersey state legislature recently approved A1084, a bill that would require solar panels to be included in the design and construction of all new public schools across the state. The Assembly Appropriations Committee is awaiting assurance from the Legislative Council that A1084 does not violate any New Jersey statutes. New Jersey’s school construction budget is one of the largest in the nation.

Controversy Over Solar Panel Mandate A1084

In addition to the benefits derived from switching to a clean, renewable form of energy, proponents of A1084, most notably Assemblyman Reed Gusciora, a well-known advocate of Green initiatives for New Jersey, argue that the mandate will also help create jobs, and help offset the rising costs of energy. According to the Statement section of A1084:

Installing a solar power system is equivalent to prepaying for 40 years of power at a fraction of the current cost. As energy rates increase this difference will only increase, leading to escalating savings for the school district over the life of the system.

Opponents of A1084 argue that the law would not be practical for all school districts in New Jersey, some of which are still struggling financially. The New Jersey Principals and Supervisors Association supports the legislation, but only as an “incentive based approach, rather than a mandate to meet our state’s school facilities’ needs.”

Pennsylvania School District Positively Impacted By Solar Power

Although Pennsylvania hasn't approved a similar mandate, one school district is reaping the benefits of its investment in solar energy. Soon after A1084 was approved, the Carlisle, Pennsylvania school district began using solar power. The district is now getting about a sixth of its energy from the sun. It is estimated that solar panels will provide 16 percent of the energy that the district needs. The project is also expected to reduce the school system's carbon footprint by offsetting more than 2 million pounds of carbon dioxide emissions annually.

We will continue to monitor mandate A1084 and update you on any developments.

Recently we reported on the Pennsylvania Senate's amendment to House Bill 1196 (HB 1196). This amendment would have delayed the implementation of the residential sprinkler mandate until January 2012.

As promised, the Pennsylvania House of Representatives returned to Harrisburg for one last session day on November 15. However, HB 1196 did not get to the floor for a concurrence vote on the Senate's amendment. Thus, HB 1196 is dead, and the residential sprinkler mandate will become effective on January 1, 2011. Industry insiders have promised to introduce new legislation next session.

If you have any questions or would like additional information about the residential sprinkler mandate, please contact Steve Williams at (717) 234-5530, or the Cohen Seglias attorney with whom you normally consult.

Pennsylvania Governor Ed Rendell announced yesterday that a $32.5 million state investment will be made for 38 rail projects in 28 counties. At a press conference held in York, Pennsylvania, Rendell explained that the freight investment would “upgrade and add capacity, stimulate local economies and provide as many as 2,500 jobs.” The governor also elaborated on the other benefits the state is expected to reap from the infusion of funds:

Transportation investment equals jobs. The rail freight projects being funded across the state…will help companies create good-paying jobs and inject billions into local economies. These grants are excellent examples of how public-private partnerships can benefit businesses, workers and communities.

Funding for these projects is set to come from the Pennsylvania Department of Transportation's (PennDOT) 2010-2011 Rail Capital Budget/Transportation Assistance Program and the 2011-2012 Rail Freight Assistance Program. The majority of the funding will come from the former, which is funded through state capital bond dollars, and the remainder will come from the latter, which is funded through the state’s General Fund. Both grant programs are organized by PennDOT's Bureau of Rail Freight.

Local service providers around the state are thrilled with what these funds mean for their communities. “Lycoming County welcomes the news,” says Mark Murawski, chief county transportation planner. Murawsi went on to say that he was, “pleased the money would go toward projects to help ease the traffic burdens” associated with the demands of the booming Marcellus Shale industry in the region.

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Lane F. Kelman contributed to this post.

The Brooklyn Bridge is made up of approximately 11,000 tropical wood planks that are exposed to heavy foot and bicycle traffic. Due to the heavy use, the planks require routine replacement. The New York City Department of Transportation faces a difficult task in balancing the competing interests of preserving the look and feel of the Brooklyn Bridge while at the same time utilizing sustainable materials. To date, in order to match the existing walkway, the City has used tropical hardwoods - known for their durability and resistance to rot - for replacement planks. Recently, this practice has come under fire from rain-forest advocates who have put pressure on the City to use alternative materials such as synthetic or recycled product. This issue is common when designing rehabilitation projects.

A Possible Solution: The Brooklyn Bridge Forest

One potential solution to the problem of maintaining the Brooklyn Bridge is the Brooklyn Bridge Forest project. This project is the brainchild of Scott Francisco, a Manhattan architectural designer and sustainable-development consultant, who developed the project in an attempt to appease rain-forest advocates while continuing the use of tropical hardwoods to create the planks. Francisco’s project would use money obtained from donations to finance a 5,000-acre forest in a country which has not yet been determined. The City would then use sustainable agriculture principles to ensure that replacement planks continue to come from the forest for the life of the bridge. Rather than use recycled materials, the Brooklyn Bridge Forest involves protection and maintenance of the source of the materials.

Although the idea is creative, the Brooklyn Bridge Forest project is in conflict with the sustainable materials principles established under the LEED Rating Systems. The current plan runs afoul of LEED criteria because the project does not include plans to:

• Create the planks with recycled materials
• Obtain the planks within 500 miles of the Brooklyn Bridge
• Make the planks out of rapidly renewable materials

The Brooklyn Bridge Forest project illustrates the tension between material specifications issued by an owner and LEED accreditation. If this project was one where a developer was seeking LEED accreditation, it would immediately be ineligible to receive credits related to the use of recycled material, local materials and rapidly renewable materials. This problem would be exacerbated on a public projects where LEED accreditation is not optional, but potentially required by local, state or federal law.

As the project progresses, it will be interesting to see if the New York City Department of Transportation elects to partner with Francisco, or if it will come up with an alternative solution more in line with LEED principles.

We will continue to monitor and report on any developments with the Brooklyn Bridge Forest project.

Steven M. Williams contributed this post.

In December 2009, Pennsylvania became the first state in the country to require that fire sprinklers be installed in all new residential construction. The law took effect on January 1, 2010 for townhouses and is scheduled to become effective for one- and two-family homes on January 1, 2011.

Controversy Over Pennsylvania Sprinkler Mandate

This new requirement has been met with some controversy. Home builders and builders associations have strenuously fought the requirement, complaining that mandatory sprinklers would add significant costs to the construction of new homes. They argue that such additional costs should not be imposed on home buyers in an already sluggish economy.

Firefighters and sprinkler installation contractors have applauded the new requirement as a long-awaited step in the fight to save lives from home fires. They dismiss the cost factor argued by contractors, and maintain that the lives saved by sprinklers would far outweigh the costs involved. According to Gary Keith, vice president of the National Fire Protection Association:

The reality is if you have a smoke alarm in your house compared to nothing your chances of survival are improved by about 50 percent. If you have both smoke alarms and sprinklers, your chances are about 80 percent . . . We think that level of protection is completely warranted when you add in that extra benefit to keeping those fires small to minimize injuries and minimizing property damages.

HB 1196-Possible Delayed Implementation of Residential Sprinkler Mandate

The fight over sprinklers in one- and two-family homes is not over. In April 2009, House Bill 1196 (HB 1196) was introduced in the Pennsylvania House of Representatives to address the implementation of the residential fire sprinkler mandate. HB 1196 floundered in the Pennsylvania General Assembly until mid-October 2010, when the Pennsylvania Senate, generally in favor of delaying the sprinkler requirement, inserted into HB 1196 a provision that would do just that. In its amended form, HB 1196 would delay the implementation of the sprinkler requirement for one year - until January 1, 2012 - in all new one- and two-family homes.

On October 14, 2010, the Pennsylvania Senate passed the amended version of HB 1196, and sent it back to the Pennsylvania House of Representatives for a concurrence vote. However, the House recessed before it could take up the matter, announcing that it would not be back in session until after the election. After this announcement, it was reported that the House would not come back into session this year to consider any legislation. Subsequently, official reports indicated that the House would take up HB 1196 when it reconvenes after the election. More recently, however, the Democratic majority in the House notified House members that all remaining session days for 2010 were being cancelled and that no bills would be considered. A small group of Democratic members have asked the leadership to reconsider so that the House can vote on outstanding legislation. Whether this will actually happen is not certain.

If the House does not approve the Senate’s amendment to HB 1196, it is almost certain that the sprinkler requirement will become effective on January 1, 2011. However, if the House does approve the Senate’s changes, the bill will go to Governor Rendell for consideration. While nothing official has come out of the Governor’s office, it is well known that Rendell generally favors delaying the sprinkler requirement and supports the Senate’s amendment to HB 1196. It remains to be seen, however, whether Rendell will, in fact, sign HB 1196 in the lame duck session.

Cohen Seglias will continue to monitor the progress of this pending legislation and update you on any developments.

After a tragic Ride the Ducks accident in July on the Delaware River, Ride the Ducks Philadelphia is proposing to construct a new route through the city. The company is looking to build a $1 million trench leading into the Schuylkill River near Martin Luther King Drive. This path would be built under a section of the current trail that is frequently used by bicyclists and joggers in the summer.

The design of this new path leaves many skeptics, as it creates a lot of engineering concerns. Joseph Syrnick, President of the Schuylkill River Development Corporation says:

There is a lot of work they need to do engineering-wise. In addition to enabling the ducks to negotiate a steep grade, the design must ensure that the boats can enter the water at low tide. The route also must not disrupt the park’s verdant aesthetic. The company will have to conceal the trench walls with plants or other cover.

Mayor Michael Nutter’s administration believes that even with the engineering challenges, this is the best option for the company, as well as the city. Richard Negrin, Managing Director of the Nutter Administration says, “I happen to think that this is what’s best for the city overall. I also think the Schuylkill is a more attractive, better option from the business aspect. It’s more picturesque.”

Ride the Ducks has hired Duffield Associates, based out of Wilmington, Delaware, to head up the project and oversee all of the construction.

The plan for the new routes does have a few major hurdles to overcome before breaking ground, including the approval of the water route by the U.S. Coast Guard, which is still awaiting the results of a National Transportation Safety Board investigation into the July accident, along with obtaining construction permits from the U.S. Army Corps of Engineers, the state Department of Environmental Protection and the City of Philadelphia.

A public hearing is being scheduled in Philadelphia, where City Council will hear arguments for and against allowing Ride the Ducks the right-of-way entrance into the river. The Departments of Parks and Recreation, Streets and Planning will also review the project.

The new route for the tour would take passengers through Old City, City Hall and the Parkway before heading onto the Schuylkill for 20 minutes.

We will continue to monitor this project and update on its developments.

Earlier today, Governor Chris Christie announced his intention to remain steadfast in his earlier decision to cancel the ARC Tunnel project, citing New Jersey’s lack of funding.

Two weeks ago, Christie chose to pull the plug on the ARC Tunnel project, a project 20 years in the works. Just one day after making this fateful decision, Christie elected to take some time to reconsider at the urging of Transportation Secretary Ray LaHood. Since this time, many have been anxiously awaiting this announcement, and just as many are disappointed. In a statement expressing his own dismay at the outcome, LaHood lamented:

I am extremely disappointed in Governor Christie’s decision to abandon the ARC [T]unnel project, which is a devastating blow to thousands of workers, millions of commuters and the state’s economic future. The [G]overnor’s decision to stop work on this project means commuters – who would have saved 45 minutes each day thanks to the ARC tunnel – will instead see no end to traffic congestion and ever-longer wait times on train platforms. Our DOT team has worked hard over the last several weeks to present Governor Christie with workable solutions to bring the ARC tunnel to life. I want to thank Senators Lautenberg and Menendez for their tireless efforts on behalf of this important project.

Christie and LaHood met this past weekend to discuss the future of the ARC Tunnel, and the federal government even offered to pour an additional $378 million into the project. Other funding options, such as loan options of $2.3 billion with the possibility of $1.85 billion in financing from a public-private partnership, were discussed by the pair. However, Christie ultimately determined that it was financially not in the best interest of New Jersey to continue construction, stating that “[w]e are still going to have to pay for the cost of it . . . I cannot place upon the citizens of New Jersey an open-ended letter of credit.” Christie had hoped that some other party, such as the federal government, the State of New York or New York City, would step up to cover the costs of overruns. The estimated cost of the ARC Tunnel Project was $9 billion, with New Jersey and the Port Authority of New York each expected to contribute $3 billion. Had the project continued, the state would have been responsible for overruns of $2.7 billion or more.

President of the Regional Plan Association Bob Yaro stated that Christie’s decision is “a real tragedy for New Jersey, and for the metropolitan area, and for the country,” adding that, “[i]n the end there were no overruns that the federal government, and the Port Authority and the state couldn't manage.”

Construction began on the rail tunnel under the Hudson River last summer. Although Christie’s decision to cancel the ARC Tunnel project could ultimately save the state billions of dollars, New Jersey will be forced to pay back the $350 million it was given to start the project. Until its cancellation, the project was the largest public works project in the country.

Pennsylvania is making a last call for companies that are out of compliance with the Commonwealth's Unclaimed Property Law (Law). Sunday, October 31, 2010, is the last day to enroll in the Unclaimed Property Amnesty Program. After this date, businesses that are out of compliance may be subject to penalties and interest, which can date back to the time the property should have been turned over to the Commonwealth.

Many companies do not realize their obligations under the Law. The Law requires that any company holding any financial assets of a third party, which have been unclaimed or unused for a statutorily prescribed period of time, otherwise known as a dormancy period, is obligated to report and tender that unclaimed property to The Pennsylvania Treasury Department (Treasury Department). The Treasury Department will serve as a custodian, holding the assets in perpetuity until reclaimed by the owner.

Assets Subject to the Pennsylvania Unclaimed Property Law

Financial assets that are subject to this law include, but are not limited to, such commonplace things as:

• Wages and Payroll
• Accounts Payable
• Accounts Receivable
• Credit Balances/Customer Overpayments
• Gift Certificates/Layaways
• Commissions
• Unused Refunds/Rebates
• Escrow Accounts
• Unused Deposits
• Basic tangible property including, but not limited to, jewelry, money, antiques and musical instruments

Unclaimed property must be reported and turned over to the Commonwealth after a dormancy period of five years. However, unclaimed wages, payroll and commission payments must be turned over after a dormancy period of only two years.

Penalties for Non-Compliance with the Pennsylvania Unclaimed Property Law

If a company or organization does not comply with its obligation to both report and turn over unclaimed property, it runs the risk that the Commonwealth will discover this during a standard audit. If it is determined that a company has failed to properly handle, report and turn over any unclaimed property, the company will be required to turn it over and pay substantial penalties and interest. The Law provides that holders of unclaimed property who fail to file reports may be convicted and fined $100 for each day a report is withheld, up to a maximum of $1,000. Those who fail to turn over the unclaimed property may be convicted of a misdemeanor and fined between $1,000 and $10,000, imprisoned for up to two years, or both.

Pennsylvania Unclaimed Property Law Amnesty Program

While the normal reporting deadline is April 15th of each tax year, the Treasury Department has created a special amnesty program that expires on October 31, 2010. The amnesty program allows companies that have never reported unclaimed property, those who have gaps in their reporting history or those who simply missed the April 15th deadline to come into compliance without having to pay penalties and interest normally associated with non-filing. The program is open to all companies and organizations, other than those currently undergoing an audit and those that have been previously notified by the Commonwealth of their failure to report unclaimed property.

The attorneys at Cohen Seglias are available to assist businesses in determining whether they have a filing obligation in Pennsylvania and to ensure that they are in compliance with the Law. Please contact Alexander F. Barth  for more information.

The Delaware Department of Transportation (DelDOT) recently unveiled its plans to update the Cape Region over the next five years.

Funded Projects

On the agenda of funded projects are intersection and sidewalk improvements, such as realignment of the Plantation-Cedar Grove-Postal Lane intersection, as well as plans to develop the Destination Station Center near Rehoboth Beach. Another highlighted project is the $14 million plan to connect all the sidewalks and provide additional pedestrian crosswalks across Route 1 between Five Points and the entrance to Rehoboth Beach. Work on this project will occur in fiscal years 2012 and 2013.

Unfunded Projects

Included in the unfunded upgrades are a new Route 9-Route 1 interchange, and the relocation of Route 9. Both of these projects are estimated to cost over $50 million each and will receive engineering money, but no construction funding has been budgeted. Other unfunded projects include widening and improvement of Route 24 from the Love Creek Bridge to Route 1, and improvements to Plantation Road between Route 24 and Route 9. Engineering funding has been made available for the improvements to Route 24, but neither project will receive construction funding.

Funding DelDOT Projects

Money for Delaware’s road projects comes from the state’s transportation trust fund, which is funded by vehicle documentation fees, the gas tax and tolls from Route 1 and Interstate 95, all of which have suffered as a result of the poor economy. In addition to reduced capital, DelDOT must also contend with rising land costs. The Route 26 project in eastern Sussex County marks the first time in DelDOT history that the cost of the land is greater than the cost of engineering and construction.

In light of the economic downturn, and increased land costs, the state is seeking alternative sources of funding. According to Sandy Roumillat, DelDOT spokesperson, “[w]e are looking at the trust fund to see what changes we can make.”

There is conflict between the state and its counties when it comes to transportation funding, especially in Sussex County. Sussex County Councilwoman Joan Deaver has stated that the perception of county officials is that roads are DelDOT’s responsibility. According to Sussex County Council President Vance Phillips:

“There is a disconnect between land use and infrastructure funding. We were told the state would build roads where development would occur, and the state dropped the ball.”

However, in Deaver’s opinion, there is a disconnect between the county and DelDOT. Because of the projects and subdivisions the county approves in non-growth areas and other areas with existing traffic and road condition issues, it should share some of the responsibility. “We have to work with the state and we can’t continue to approve developments in Level 4 rural areas where no road work is planned or will ever be done. We can’t even get road work done in Levels 1 and 2.” Levels 1 and 2 are designations given to high growth areas where development is preferred in the state, whereas Level 4 areas are nongrowth farming areas. According to Deaver, “there needs to be intergovernmental cooperation.” Deaver has also said that developers of big projects need to contribute to road upgrades, which is a policy that DelDOT has adopted.

After weeks of speculation, Governor Chris Christie announced his decision yesterday to cancel the $8.7 billion ARC Tunnel Project. This move came after the ARC Executive Steering Committee informed him that the project could cost New Jersey taxpayers an additional $2-5 million, recommending “immediate and orderly shutdown.” At a Trenton news conference, Governor Christie stated, “The only prudent move is to end this project. I can’t put taxpayers on a never-ending hook.” He ended the project despite urging from Department of Transportation Secretary Ray LaHood.

The cancellation of the project has disappointed many: Hudson County residents, legislators, environmental groups, transportation advocates, and long time supporters of the project-Senators Bob Menendez and Frank Lautenberg. Hudson County executive Tom DeGise stated, “[i]t's a devastating blow for our region.

Senator Menendez has claimed that Governor Christie has been “intent on killing the tunnel,” regardless of the consequences. According to Menendez:

The governor’s public statements portray surprise and uncertainty about cost estimates, but it’s hard to understand how he has so little control of and information about a project that is directed by his own administration. It would seem that a more sensible and level-headed approach on behalf of New Jersey workers, commuters and taxpayers would be to take a deep breath, work with all of the parties involved to identify ways to reign in the costs and get the tunnel built.

Senator Lautenberg’s sentiments mirrored those of Menendez:

Without increased transportation options into Manhattan, New Jersey’s economy will eventually be crippled. The Governor has sentenced New Jersey to a future of insufficient access to New York City, fewer job opportunities, and lower home values.

In discussing the impact on the thousands of citizens affected by the move, Senator Lautenberg also stated that the Governor, “should be talking to the people who are out there stuck in their cars in the morning wanting to go to work. Or the families who are worried about the air their kids breathe.”

Although supporters of the decision feel that it may save taxpayers money in the long-term, it will cost the state money now. The move will cause New Jersey to lose $3 billion in federal funding, and it may have to return the $300 million already invested in the project.

Just one day after lifting a suspension for all New Jersey Department of Transportation (NJDOT) construction and design projects, the hold is back on for about 100 design and planning projects.

Late Tuesday, NJDOT Commissioner James Simpson put a hold on projects that are in the early phases of planning and development, stating:

We are taking the prudent step of extending the hold on early planning and design work at least until the bond sale and refinancing plan is executed. We will use this time to conduct a cost-benefit review of each of these proposals.

Impacted by the latest hold are hundreds of engineers, designers and allied workers.

The future of the ARC Tunnel project is still uncertain. Although Governor Chris Christie is on the campaign trail, he is expected to discuss the project with transit officials today, and a decision is expected by the end of this week or next week.

Cohen Seglias remains committed to monitoring and reporting on emerging developments in this story.

Renovations are underway to restore the historic Wheeling, West Virginia Independence Hall. The Independence Hall building was constructed in the 1800’s and served as the capital building even before West Virginia was formally recognized as a state. As with any older structure, the passage of time has led to the deterioration of the exterior of the building, particularly its leaky roof. The visual effects of the wear and tear, along with the desire to upgrade the interior of the building to make it more functional and user-friendly while maintaining its historic exterior, are the catalysts behind the renovations. The state of West Virginia has pledged $1 million for the project and general contractor Walters Construction Inc. of Wheeling, West Virginia began the project in May, 2010.

Similar projects to modernize buildings while preserving their historic exteriors have been popping up all over the country. In Philadelphia, the city has begun the fourth and final phase of a 17 year renovation project for City Hall. Philadelphia’s City Hall renovation project involved scrubbing the entire perimeter of the exterior of the 1.2 million-square-foot building. In New York City, a $106 million renovation project is underway to restore the 198-year-old City Hall building that is one of the country’s oldest, continuously-used city halls.

Wheeling, Philadelphia and New York are just the latest of many cities to undertake significant renovations of historic government buildings. With private construction projects slowing due to the economy, contractors are wise to look for similar government renovation projects in their local areas.

The project to expand the State Correctional Institute at Graterford due to overcrowding has been cancelled. Currently, the prison houses 2,100 inmates, but it is so crowded that prisoners are being shipped to Michigan and Virginia. The project was originally slated to add 4,000 beds to the prison, 3,000 of which would have replaced existing beds. State officials had hoped to break ground this fall on the project site.

On August 31, 2010, Pennsylvania Commonwealth Court Judge Dan Pellegrini ruled in favor of a group of contractors who filed suit against the Pennsylvania Department of General Services (DGS) and the Pennsylvania Department of Corrections for violations of the Commonwealth’s procurement laws. The Graterford Prison Project Case effectively halted the bidding process on the $365 million construction project to expand the prison.

The case centered around 3 issues:

• Whether DGS could limit the bidding to 3 bidders
• Whether DGS should have posted bidders’ technical details on the internet
• Whether the state must obtain separate bids for heating and air conditioning, plumbing and electrical work

In his opinion, Judge Pellegrini concluded that:

[B]udgetary concerns or expediency do not give the Department the right to ignore a legislative mandate. . . While granting a preliminary injunction may result in prisoners staying out of state a little longer (albeit, at no additional net cost to the Commonwealth), it will harm the public more if we allow the Department to willfully violate the law.

The attorney representing the contractors stated that they were only interested in making sure that DGS was following state law. Immediately after the ruling, Ed Myslewicz, a spokesperson for DGS, voiced the agency’s disappointment in the outcome, “[o]bviously, we are disappointed by the opinion, because it affects a tremendous amount of construction activity.” At that point in time, Myslewicz stated that DGS attorneys were reviewing the opinion but that no decision had been made regarding whether or not to appeal it.

On September 27, 2010, DGS issued Bulletin No. 10 cancelling bids for the project as currently issued, “in the best interests of the Commonwealth,” indicating its plan to take “immediate action to revise and re-issue the Request for Proposal for a Design Build Contractor for SCI Graterford East and SCI Graterford West.” As a result, companies interested in bidding on the project or those that have already prepared a bid, should not consider their efforts wasted, as a new round of bidding is approaching.

In addition to the lawsuit relating to the DGS bidding, a lawsuit is pending before the Pennsylvania Supreme Court over whether or not DGS can utilize a project labor agreement (PLA) on the project. The lawsuit is an appeal of the December 2009 decision of the Commonwealth Court in which Judge Pellegrini ruled that the PLA was appropriate for the project because it was critical that the project deadline be met “without disruption or stoppage.” In response to the recent bid cancellation, DGS filed a Motion with the Supreme Court claiming that the appeal was now moot since there is no bid. Counsel for the non-union contractors, who are seeking a determination that a PLA should not be utilized at the project, plans to move forward with the appeal because it is anticipating that DGS will reissue the project for bid with a PLA.

Cohen Seglias will continue to monitor and report on the issues surrounding these cases as they emerge.

Prompted by criticism relating to inappropriate perks, nepotism, and corruption, the Delaware River Port Authority (DRPA) has recently enacted reforms that will affect DRPA’s construction projects. The DRPA is responsible for operating 4 toll bridges between Philadelphia and New Jersey, as well as the Port Authority Transit Corporation (PATCO) commuter rail line.

The DRPA first came under scrutiny last month when it was revealed that its public safety director, Michael Joyce, had allowed his daughter to use a DRPA EZ-Pass account for free. Soon after, DRPA raised eyebrows again when it revoked certain employee perks, including the use of a free EZ-Pass, on August 18, 2010, and then backtracked and attempted to reinstate the perks on August 30, 2010, less than two weeks later. Last week, New Jersey Governor Chris Christie vetoed the DRPA’s attempt to restore the perks.

Public scrutiny arising from the discovery of employee perks and other corruption resulted in a push for reform not only from Governor Christie but also from Pennsylvania Governor, Edward G. Rendell. Substantial changes resulted, including the institution of regular audits and rules prohibiting nepotism.

Elimination of No-Bid Contracts

One notable reform is the elimination of no-bid contracts. Generally, no-bid contracts on government projects are permitted only in limited circumstances. No-bid contracts may be permitted where there is only one source for a product; for example, if only one manufacturer produced the materials necessary for a project. Similarly, for projects where time is of the essence, such as when repairs to a bridge must be done within a matter of hours to prevent harm to commuters, a no-bid contract may be appropriate. Prior to the recent reforms, assertions were made that the DRPA allowed no-bid contracts for projects that should have been open for bidding.

The elimination of no-bid contracts is great news for Philadelphia and New Jersey contractors. Bridge and rail line projects that otherwise would have been funneled to regular DRPA contractors without any open bidding will now be made available for public bid. Open bidding means more opportunities for area contractors. Area contractors should become aware of all of the new DRPA requirements to ensure that their bids will be eligible for consideration for newly available projects.

Mid-Atlantic contractors can expect to see more “rails-to-trails” work opportunities in the near future. In 1916, at the height of railroad expansion in the United States, there were more than 275,000 miles of railroad track across the county. By the 1970s, many railroad companies had declared bankruptcy and large areas of track had fallen into disuse. As a solution for the miles of unused track, the railbanking movement began. Railbanking is the conversion of abandoned rail lines into usable recreational trails, such as hiking, biking, horse riding, that can easily be converted back to rail lines if necessary.

Railbanking allows a railroad company to transfer the interest in the land formerly used as a rail line to a private organization or public agency that may then use the land for any purpose consistent with future restoration of railroad track and service. This development is commonly referred to as the “rails-to-trails” movement.

Railbanking has been the subject of legal challenges, especially in areas where developers would prefer the land be put to commercial use. One such legal challenge arose from the land known as the Armstrong Trail in Western Pennsylvania. This land was railbanked by Conrail, a provider of rail service to freight customers, and transferred to the Allegheny Valley Land Trust after railroad service was terminated. The Allegheny Valley Land Trust converted the land into a public hiking and biking path.

In Moody v. Allegheny Valley Land Trust, the Pennsylvania Supreme Court was asked to decide whether Conrail had properly railbanked the land. The challengers argued that Conrail’s attempt to railbank the land was ineffective because the land was not maintained in a manner that allowed Conrail to immediately restore railroad service. The Allegheny Valley Land Trust argued that use of the land as a trail was not inconsistent with later reinstallation of railroad track in that area. The Court adopted an expansive view of railbanking, holding that Conrail could restore railroad service and that the land did not have to remain free from use in the interim.

The Moody decision was viewed as a great victory for the rails-to-trails movement. Since the decision, there has been an increased interest in rails-to-trails developments. For example, in mid-August, the Commonwealth of Pennsylvania solicited electrical and general contractor bids for a rails-to-trails project in Swatara State Park.

With the momentum from the Moody decision and the large amount of unused track in the mid-Atlantic area, contractors may see increased rails-to-trails projects on the horizon.

Christopher P. Soper, LEED AP, associate with Cohen Seglias, contributed to this post.

This summer, Delaware Governor Jack Markell signed into law four renewable energy bills designed to expand Delaware's wind and solar power industries. The new legislation creates incentives aimed toward attracting companies in these industries to Delaware.

The bills also offer incentives that will benefit solar designers, manufacturers and installers. There can be little doubt that demand for solar electric systems will increase since both homes and businesses will be able to sell back 110% of their aggregate electrical consumption to the grid, and because of the newly created ability to place ground-mounted solar energy systems on property zoned for residential use.

In addition, the bills promote alternate sources of renewable energy, such as offshore wind infrastructure or a large wind park off the coast of Delaware. According to Collin O’Mara, who serves as both a member of Governor Markell’s Cabinet and as Secretary of the Delaware Department of Natural Resources and Environmental Control:

More than 95 percent of Delaware’s electricity comes from fossil fuels with 70 percent from coal-burning power plants. These green energy bills will help the state transition at a faster rate to renewable energy. We can dramatically reduce our reliance on fossil fuels in the next 15 years and move closer to the healthy environment and green economy we want in Delaware. The bills also provide an opportunity for all Delaware citizens to participate in buying clean power, using clean power and being a part of the clean technology transition.

Work opportunities for metal fabricating contractors, electrical contractors and marine trade contractors are anticipated. Job creation, less dependence on fossil fuels and rate stability are just some of the goals envisioned by the legislation which could serve as a template for clean energy bills for years to come.

The state has wasted no time in making good on its efforts to increase its reliance on renewable energy sources. On September 7, 2010, the Delaware Public Service Commission (PSC) approved 2 Delmarva Power contracts for renewable energy. The PSC approved the 20-year, $42.6 million purchase of power from a solar electricity farm planned in Dover, as well as moving back the dates for deliveries of electricity from the NRG Bluewater Wind offshore wind project to no later than the end of 2016, 2 years later than the original contract. Also in the works, the Dover SUN Park is expected to start operations next summer. The City of Dover will be buying all of the power from SUN Park, which is expected to generate enough electricity to serve 1,300 homes.

Initiatives similar to these bills recently passed in New Jersey and are currently before the Pennsylvania legislature.

For more information or to obtain a copy of the bills, please e-mail Christopher P. Soper, or call (215) 564-1700.

There has been much public discussion centered on the appropriateness of building a mosque in close proximity to Ground Zero. The controversial project to develop an Islamic cultural center in New York City is known as Park51. The political aspects of the Park 51 project are hotly debated; however, most commentators fail to recognize the practical hurdles facing the planned construction. Construction industry experts may recognize the significance of these obstacles, but these more mundane aspects of the Park51 project rarely make the news.

Permits

Acquiring the necessary permits for the Park51 project will not be easy for developers. The construction involves the repurposing of a 152-year-old building that was formerly a retail clothing store. The design of the Park51 project is expansive and includes a 500-seat auditorium, swimming pool, restaurant, and retail space. The building’s existing certificate of occupancy was issued in 1987 and is limited to retail use of the building. Currently, the building is a worship center that is operating under temporary permits. Additional occupancy permits will be required if the building is to be converted from retail use to a community center with all the planned amenities.

Labor

Finding construction workers willing to work on the project will be very difficult, and without skilled workers, the project may be unable to get off the ground. Although it has been estimated that the Park51 project could create approximately 150 full-time and 500 part-time jobs, some New York construction workers have refused to work on the project. Although the unions have not yet taken a position on the project, Louis Coletti, president of the Building Trades Employers’ Association, said that he understands why the union’s members would be hesitant to work on the Park51 project:

It's a very difficult dilemma for the contractors and the organized labor force because we are experiencing such high levels of unemployment . . .Yet at the same time, this is a very sacred site to the union guys.

Financing

Finally, as with any construction project, it will be a struggle to obtain sufficient funding. The Park51 project is estimated to cost $100 million and fundraising has not yet begun. The controversy surrounding the project could cause potential supporters to withdraw their funding, forcing abandonment or scaling down of the project. Even if financing is secured, it could take months to hammer out all the details of construction loans.

When payment for good work performed on a construction project is delayed, contractors, subcontractors, and suppliers alike must act quickly to preserve their mechanics’ lien rights in Maryland.  A mechanics’ lien is a way for contractors,subcontractors or suppliers whose work improved the value of a property to receive payment. The lien, when established, attaches to the property which serves as security for the unpaid amounts due to the contractors, subcontractors or suppliers. If critical deadlines are missed, however, these parties will forever lose their right to payment. Preservation of mechanics’ lien rights is particularly important in this economy where the risk of default and/or non-payment is especially high.

What Must Happen To Establish A Mechanics’ Lien in Maryland?

 In Maryland, the right of a “contractor” or “subcontractor” to file a lien against an “owner” – specially defined terms under Maryland law that include suppliers – is governed by the Maryland Mechanics’ Lien Statute.  To establish a lien in Maryland, a contractor or subcontractor must do the following:

• First, a contractor or subcontractor doing work or furnishing materials at a project site must give a written Notice to Owner or Owner’s Agent of Intention to Claim a Lien within 120 days of performing the work or furnishing the materials.   The Notice must contain the following information:
  • The amount due and owing
  • A brief description of the work done and/or materials furnished
  • The time the work was performed and name of the person to whom the materials were furnished
  • The description of the property
• Second, within 180 days of performing the work or furnishing the materials, the contractor, subcontractor, or supplier must file a petition to establish the mechanics’ lien, with a sworn affidavit. An attorney must file the petition for the contractor in the Maryland county where the property is located.
• Third, after the petition is filed, the Court will issue a Show Cause Order and schedule a show cause hearing to determine whether probable cause exists to establish the lien or interlocutory order.  Probable cause is measured as the likelihood that a reasonable judge would establish the lien and the show cause hearing serves as a “mini-trial” on the contractor’s entitlement to the lien. 

Contractors and subcontractors who engage in public work must be mindful of the language contained in bid solicitations.  While it is easy to presume that the solicitations or advertisements for certain types of contracts are consistent within the same municipality, agency or public entity, bid requirements could be unintentionally created by the use of particular words over others, for example, “shall” as opposed to “may.” 

In a recent New Jersey case, Cioffi’s Towing Service, Inc. v. Borough of Collingswood, et. al., the Court held that a bidder who failed to list certain equipment deemed mandatory by the municipality would be disqualified from consideration.  The Court determined that compliance with the list of equipment was mandatory because the word “shall” was used.  Although this is not necessarily a construction case, the lesson for New Jersey bidders is that they must be increasingly mindful of any list of requirements contained in a bid solicitation or advertisement, especially since failure to meet such requirements could result in “material, non-waivable” bid defects. 

In this case, the municipality included certain equipment requirements in the bid, and the list of equipment owned provided by the bidder did not comport with these requirements.  The reasoning behind the inclusion of the requirement for certain items was so that the municipality could be certain of the availability of the equipment during the performance of the project.  Because the bidder failed to comply, the municipality had no assurance that this equipment would be available, or that the job could be done properly.  Additionally, it would not have been fair to award the job to the bidder here because there may have been potential bidders who declined to bid on the project because they did not have the required equipment or the ability to obtain it, even if they could adequately perform the job.  Allowing this bid to be considered, the Court reasoned, would give an unfair advantage to the bidder despite their failure to comply with the requirements. 

The Court noted that the bid solicitation included language stating that the bid “shall meet the minimum requirement…”.  The Court ruled that this language was purposeful and, therefore, it would be impermissible for the municipality to “transform the mandatory requirement in specifications into a request”.

This case illustrates why it is so important for contractors and subcontractors to always read each portion of a bid solicitation or advertisement with extreme care, even if it looks like a template or boilerplate language.