The Site Report - Construction Industry Insights, Issue 4, April 2024

Todd Biddle, Jonathan Deasy, Stephanie Eaton, Steven Hemric, Nicholas Mooney II, Julian Neiser, Shane Riley
Spilman Thomas & Battle, PLLC
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Issue 4, 2024

Welcome to our fourth issue of 2024 for our construction industry insights e-newsletter - The Site Report.

In our Ask the Attorney segment at the bottom of this e-newsletter, we introduce you to Todd Biddle, Member in our Huntington, West Virginia office, who is well versed in liability issues. Todd outlines why partnering with an authority on liability law is vital to the success of every construction project.

Thank you for reading!

Amended AAA Construction Industry Arbitration Rule Updates

“[T]he updates reflect comprehensive input from nationwide roundtable discussions among advocates, in-house counsel, arbitrators[,] and industry professionals.”

Why this is important: The American Arbitration Association (AAA) is one of the most commonly used arbitration and mediation administration services, and with the large number of construction contracts that provide for AAA-administered arbitration, the AAA’s Construction Industry Arbitration Rules come into play for construction attorneys and project professionals on a regular basis. The new rule updates include both substantive and technical changes, many of which relax deadlines, create efficiencies, and help streamline the arbitration process. While most of the changes should result in a smoother arbitration process that comports with common practices, attorneys and industry professionals alike should familiarize themselves with the changes to ensure proper procedures are followed and that they use all of the new advantages available. --- Steven C. Hemric

Shapiro Calls for a Construction-Ready Pa. to Improve Commonwealth's Economy

“In his budget proposal, Shapiro seeks a full rollout of a pilot program initiated last year, PA SITES (Pennsylvania Strategic Investments to Enhance Sites) — a $500 million bond and grant initiative to make the commonwealth shovel-ready for large-scale manufacturing.”

Why this is important: Governor Josh Shapiro wants a chip factory in Pennsylvania akin to central Ohio’s Intel semiconductor manufacturing facility. As part of his budget proposal, Shapiro is looking to roll out a pilot program initiated last year known as PA SITES – Pennsylvania Strategic Investments to Enhance Sites – a $500 million bond and grant initiative that seeks to position the Commonwealth as a home for large-scale manufacturing. The purpose is clear: foster economic growth in Pennsylvania. Although this program has received pushback from the Legislature, negotiations between Republicans and Democrats remain ongoing at this time. Construction professionals in Pennsylvania should therefore keep a watchful eye on Shapiro’s efforts to ensure they are ready to mobilize in the event this program is enacted into law. --- Jonathan A. Deasy

How Baltimore Bridge Collapse Impacts Supply Chain

“While the full extent of the impact is yet to be determined, the collision is likely to have far-reaching consequences for the Port of Baltimore and its role in the regional and national economy.”

Why this is important: Sometimes a tragic event in a single location can magnify issues facing the construction industry more than even the accumulation of issues across the country. Unfortunately, the March 26, 2024, collapse of the Francis Scott Key Bridge in the Port of Baltimore did that in more ways than one. In addition to raising issues related to bridge construction and design to prevent future loss of life caused by a barge striking a bridge, such as adding larger or more “dolphins” (i.e., circular concrete constructions that are located near the central supports of a bridge), the Francis Scott Key Bridge collapse also pinpoints supply chain vulnerabilities, especially for cargo located at or destined for the Port of Baltimore. This article reports that between 30-40 container vessels unloaded approximately 21,000 containers each week. In relation to the construction industry, the Port of Baltimore is a key hub for steel and aluminum imports/exports. As a result of the March 26 tragedy, these vessels and containers will have to be diverted to other ports, which in turn disrupts schedules and increases the labor burden at other ports where the diverted cargo must be unloaded and processed. It is expected that it could take months to absorb and process the diverted materials in other ports, such as those in Norfolk and Philadelphia. As noted by Christian Roeloffs, co-founder and CEO of Container xChange, the Frances Scott Key Bridge collapse “highlights the importance of contingency planning, diversified routing options, and the integration of real-time tracking and analytics to mitigate the impacts of unforeseen events . . , [and] serves as a reminder that infrastructure vulnerabilities can lead to disruptions, and being prepared with flexible, adaptive strategies is essential for maintaining continuity in the face of challenges.” If you suspect or are aware of supply chain disruptions on your projects caused by the Baltimore bridge collapse, and want to understand your contractual options and/or remedies, contact the Spilman Construction Practice Group to analyze your contract documents and provide counsel on how best to mitigate the impacts. --- Stephanie U. Eaton

Dan King Plumbing Heating & Air Conditioning, LLC v. Avonzo Harrison – NC Court of Appeals – 2024 WL 1391165

Why this is important: This is the North Carolina Court of Appeals’ second decision in the Dan King case. In January 2022, the Court of Appeals issued its first opinion, touching on a number of common issues in North Carolina construction disputes, most prominently the evidence required to support a workmanship claim and the bases for unfair and deceptive trade practices (UDTP) claims. Now, in determining the Superior Court was correct to order a new trial for additional fact finding on the homeowner’s workmanship and UDTP claims, the Court of Appeals reiterated the importance of its prior decision. Regarding workmanship claims, the case again confirms that every proponent of a workmanship claim should be armed with expert testimony. The exceptions to this rule are limited and must be carefully evaluated. Regarding UDTP claims, the Court again highlighted how success is based on the specific facts at issue in each case, even when fraud clearly exists, and parties pursuing UDTP claims must be cognizant of the facts, circumstances, and aggravating factors they may need to prove. In particular, some facts that may seem obvious to claimants may require substantiation via testimony from other individuals, and possibly expert witnesses. The Court’s decision that a new trial was appropriate also highlights the importance for attorneys of carefully analyzing all factual findings that could be needed to support their clients’ claims before starting trial—and ideally at the outset of the case—to ensure proper planning and to avoid factual gaps like those encountered in the Dan King case. --- Steven C. Hemric

603 Glenwood, Inc. v. 616 Glenwood, LLC – NC Court of Appeals (Unpublished) – 2024 WL 1399367

Why this is important: This case goes back to contracting basics, tackling the questions of when a contract is formed and whether signing a formal document is really necessary. The Court of Appeals discussed the parties’ negotiations in detail and confirmed that, under the right circumstances, signing a formal contract document can be a condition precedent to formation of a contract, even if the parties otherwise superficially appear to have agreed on most of the core terms. Because these parties clearly contemplated and discussed a formal agreement to be signed, and that formal execution never occurred, the Court of Appeals determined that the parties never finalized their agreement and never formed a contract. This highlights the importance of following through on finalization of agreements and ensuring that all of the formal documentation discussed during negotiations is in fact signed once an agreement is reached—from simple change orders to settlement agreements in multi-million dollar disputes like the one at issue in Glenwood. --- Steven C. Hemric

Using AI to Build Cyber Resilience for Critical Infrastructure

"Cyber resilience serves as a literal survival strategy, offering a framework to detect threats, understand attacks, recover swiftly, and adapt to ever-evolving risks."

Why this is important: The article discusses critical infrastructure, which is essential for public safety and comfort, being a prime target for threat actors. Its status as a target is enhanced because some aspects of our nation’s infrastructure have limited IT budgets and departments as well as a complex web of stakeholders which results in larger attack surfaces. The article argues that our nation’s critical infrastructure can strengthen its defenses by harnessing the power of AI. For example, AI can be used to more rapidly detect anomalies, validate the integrity of vast quantities of data, determine the scope of attacks, more quickly implement recovery strategies. The article makes the point that organizations seeking to fortify their defenses against cyberattacks should consider incorporating AI into those defenses. Companies that are not in the critical infrastructure space nonetheless should consider how they can implement AI into their cyber defenses. If you would like to discuss your company’s defenses to cyberattacks, contact a member of Spilman’s data privacy team. --- Nicholas P. Mooney II

Is AI the Future of School Safety?

“All upgrades must be considered in collaboration with existing personnel so school security can be supported — not replaced — with automated technology.”

Why this is important: Methods of student monitoring may be changing from traditional practices to advanced technology solutions. Campuses across the country are experimenting with the use of expertly programmed metal detectors, digital hall passes, online activity monitoring programs, and artificial intelligence (AI) video tracking systems to address various safety concerns in schools. While these technologies offer efficiency in detecting risks, they also have shortcomings compared to manual methods, and their implementation requires careful consideration of financial and social implications.

It is important for all stakeholders to understand the limitations of AI safety technology and the need for collaboration between technology and human monitoring. Ultimately, advocates of the new technologies call for a balanced approach that prioritizes student safety without disregarding privacy concerns or incurring unnecessary financial burdens. --- Shane P. Riley

Ask the Attorney

Why is retaining legal counsel so important, especially regarding liability issues with construction-related projects?

“As someone who routinely provides guidance with liability issues, I have seen my fair share of situations that could have been resolved much faster and with less cost to the client if an experienced attorney was involved at the outset. This is particularly true when it comes to construction projects. Construction law can be uniquely complex, especially when it comes to compliance with the various federal and state statutes and regulations as well as local ordinances. The inherent risks with safety issues, contracts, and environmental concerns make it essential that legal counsel is there to help mitigate those issues. Given how many parties are involved in a construction project means there are a variety of contracts and obligations. Making sure your rights are protected is paramount for your legal counsel. The range of potential liabilities can be vast, including personal injury claims, property damage claims, and breach of contract claims. As with any business agreement, disputes can arise. Dispute resolution options need to be evaluated and implemented quickly with options for mediation, arbitration, or litigation. And, let’s not forget about insurance coverage. Your attorney can review your insurance policies to ensure you have adequate coverage for potential liabilities. Being proactive when it comes to liability is extremely important, and finding the right counsel for your construction project can be invaluable. If you have any questions about your construction project and liability issues, please contact us.” --- Todd A. Biddle

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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