MB 2018 Presentation- Final Website Handouts · Mario Puzo, The Godfather. 4/17/2018 3 ... Education Loss Prevention Loss Prevention "Discourage litigation. Persuade your neighbors

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What Would You Do? Recent Issues and Case Studies

M. Brandon Waddell

Vincent Serafino Geary Waddell Jenevein, PC

Overview

• How they operate• How they affect you• How to protect your firm

• How they operate• How they affect you• How to protect your firm

Predatory Law Firms

• Contracts• Value Engineering• Existing Site Information

• Contracts• Value Engineering• Existing Site Information

What Would You Do?

• Commercial Retail Development• Commercial Retail Development

Case Study

Predatory Law Firms

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"There is a vague popular belief that lawyers are necessarily dishonest. I say vague, because when we consider to what extent confidence and honors are reposed in and conferred upon lawyers by the people, it appears improbable that their impression of dishonesty is very distinct and vivid.”

“Yet the impression is common, almost universal. Let no young man choosing the law for a calling for a moment yield to the popular belief—resolve to be honest at all events; and if in your own judgment you cannot be an honest lawyer, resolve to be honest without being a lawyer. Choose some other occupation…"

“There's no honor among thieves... except for us of

course.”

“A lawyer with a briefcase can steal more

than a thousand men with guns.”

Mario Puzo,

The Godfather

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The Pitch

The Pitch

Appeal to Client’s Needs

General complaints and deficiencies

Comfort Issues and Air Quality

Duties to the shareholders, taxpayers and children

Lack of qualified personnel to identify design and construction defects

Lack of funding to maintain facilities

The Solution is Identified

“Free” inspection by experts is offered

Law firm is engaged to retain experts to conduct the inspection

Stipulation to hire law firm to prosecute claims for any deficiencies identified

Contingent Fee

40% plus reimbursement of expenses from recovery

The Inspection

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The Inspection

Complete Facility Assessment

Indoor Air Quality

Energy Efficiency

Building Envelope

Foundation

Floor Elevations

Site Survey

Site Drainage

Design Review

Architectural

Structural

Civil

MEP

Geotechnical***

The Claims

Cost of Necessary Repairs Per Defendants:

$1,549,969.87

Alleged Damages

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The Repeat

The Referrals

The Referrals

Actively market to clients at conventions

Referrals provided by counsel

The referrals are working

Currently have cases involving condominiums, schools and a movie theater

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The Realities

Reality #1:

The predatory law firm has a diverse clientele

School DistrictsSchool Districts Cities/Counties/ Municipalities

Cities/Counties/ Municipalities

Apartment ComplexesApartment Complexes

HospitalsHospitals MuseumsMuseums Government Housing

Government Housing

HOA Communities

HOA Communities Hotels/LodgingHotels/Lodging Senior LivingSenior Living

Retail Shopping Centers

Retail Shopping Centers

Commercial Buildings

Commercial Buildings

Reality #2:

If multiple claims exist, the claims will be asserted over multiple policy periods to maximize the potential recovery through insurance coverage.

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Reality #3:

The predatory law firm and its experts will apportion the risk to all design and construction firms to maximize the potential recovery.

Reality #4:

The design firms will be implicated for construction deviations based on its construction phase services.

Reality #5:

The size of your firm is not necessarily proportional to the size of the claim.

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Reality #6:

The size of your professional fee is not necessarily proportional to the size of the claim.

Reality #7:

A limitation of liability provision is not enforceable against a governmental entity. Neither is the statute of limitations.

Reality #8:

Documentation and document retention are key to defending these claims, but all too often, the documentation is lacking.

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Reality #9:

The design professional is entitled to a fair and impartial jury trial in the county in which the project is located.

Reality #10:

Repeat work can mean repeat claims.

Reality #11:

The design professional’s website is a roadmap to potential clients for the predatory law firm.

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The Solutions

The Solutions

Insurance CoverageInsurance Coverage

Client and Project

Selection

Client and Project

Selection

Risk Management and Internal Controls

Risk Management and Internal Controls

Contract Review and NegotiationContract Review and Negotiation

Legislative Action

Legislative Action

Continuing EducationContinuing Education

Loss PreventionLoss Prevention

Loss Prevention"Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser---in fees, expenses, and waste of time. As a peacemaker the lawyer has a superior opportunity of being a good man. There will still be business enough.“

- Abraham Lincoln

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Contracts

BASIC SERVICES MODIFIED

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BASIC SERVICES

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Safety

?

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SAFETY INCIDENTS

General Contractor

Incident Report

Statement

OSHA

Investigation

Interviews

Findings of Responsible Persons

Citation and Notification of Penalty

Source: OSHA Guide to Design Safety (2009)

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SAFETY INCIDENTS: WHAT TO DO

Immediately Contact

McLaughlin Brunson

Discuss Opening a LP File with Your Carrier

Seek Advice of Counsel

Prepare for Your OSHA Interview and Statements

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Value Engineering: What Would You Do?

?

Recommendations

VALUE ENGINEERING REQUEST: WHAT WOULD YOU DO?

The cost to remove and replace with select fill exceeded the Design-Builder’s GMP

Civil Engineer providing the track system design is requested to provide alternative methods of soil stabilization to get the project to within the GMP

Design-Builder directs the Civil to issue a design for lime stabilization to a depth of 12”

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VALUE ENGINEERING: THINGS TO CONSIDER

Engage in discussions with the client to identify the cost-benefit analysis

Discuss the short-term cost savings versus long-term

impact

Fully document those discussions

Obtain written acceptance of the VE item from the

client/owner

Identify your floor, and resist the urge

to go below it

Adjacent Work: What Would You Do?

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What Would You Do?

A) Issue the plans. The Contract Documents put the responsibility for means and methods on the Contractor, and there is no duty to warn the Contractor of an unknown condition on an adjacent site.

B) Recommend an investigation of the adjacent foundation to determine depth before issuing the plans?

C) Note the following on the plans “Do not excavate below the depth of the foundation of the existing building.”

D) Combination of above or other?

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Defenses

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Defenses

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Case Study: Shopping

Center

The Project

Sixteen (16) buildings with forty-four (44) commercial retail, service and restaurant tenant spaces

Original Cost of Construction: $24,600,000.00

All design contracts assigned by the Developer to the Owner upon Final Completion

The Problem: Excessive vertical movement in the slabs in a portion of the buildings

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The Project Team

Developer (North Texas)

Architect (Midwest)

Structural (Midwest)

Civil

(North Texas)

Geotechnical (South Texas)

The Contract and Geotechnical

Report

Geotechnical Scope of Work

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Limitation of Liability in Exhibit “C”

Limitation of Liability Removed

Actual Authority v. Apparent Authority Actual authority occurs when the

right to bind the corporation is legally conferred upon an individual who is acting on behalf of the company

Apparent authority, is based on estoppel, arising “either [1] from a principal knowingly permitting an agent to hold himself out as having authority or [2] by a principal's actions which lack such ordinary care as to clothe an agent with the indicia of authority, thus leading a reasonably prudent person to believe that the agent has the authority he purports to exercise.”

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Testing Performed

Report

Boring Logs

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Foundation Recommendation

Geotechnical Addendum

The Alleged Damage and

Expert Opinions

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Geotechnical Issue

Future Damage to Tilt-Wall Panels

Time rate of movement will be dependent upon the availability of water. Based on experience with similar projects, movement of the slab and potentially foundation will occur over the next 20 years. Periodic and frequent observation of the exterior of the building will be necessary to document areas where water ponds next to the structure.

To date, the deficient design has result in actual damage and distress to Buildings A, B, C, D, E and E2. It is my opinion that the balance of the Center will undergo similar movement and distress as the Center ages.

Future Damage to Slabs Anticipated

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Structural Engineer’s Alleged Liability

The Proposed Repair

Total Alleged Cost of Repair

$18,169,626.71

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The Defenses

Cost of Repair Per Defendants

Drainage Issues

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The Law: Measure of Damages

In Texas, a Plaintiff may elect to pursue any measure of damage which would yield the greatest recovery

However, the Defendant bears the burden of establishing an alternative measure of damage controls

Turner: Measures of Damage

Remedial Measure of Damages (Cost of Repair): If the contractor has substantially performed, the owner can recover the cost of repair and completion less the unpaid balance of the contract price.

Substantial Performance:

“Permits [1] only such omissions or deviations from the contract as are inadvertent and unintentional, [2] are not due to bad faith, [3] do not impair the structure as a whole, and [4] are remediable without doing material damage to other parts of the building in tearing down and reconstructing.”

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Turner: What if the Contractor fails to Substantially Perform?

RULE: “Generally, where there has not beensubstantial performance, the measure of theowner’s damage is the difference between thevalue of the building had it been constructed inaccordance with the contract.”

Defendants’ Positions Difference-in-Value Opinions

Defense experts opined that the value of the retail center was derived from the income generated from rental charges to retail tenants

Despite clear evidence of localized damage, the Owner’s rental rates were not substantially impacted

Final Opinion: No Diminution in Value

Lessons Learned

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Lesson #1:

Create and enforce protocols for contract review, negotiation and execution.

Lesson #2:

Design professionals with limited or no local experience can be significant targets, and your coordination with them will be scrutinized in litigation.

Lesson #3:

Your contractual right to rely on the accuracy and completeness of the geotechnical report will be scrutinized under the standard of care by testifying experts.

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Lesson #4:

If your contract provides for you to provide a specific service or test, then either provide it or amend the contract to remove it from your scope.

Lesson #5:

Documentation of contractor deviations during the construction phase can be key to defending cases. Review and update your document retention policy.

Lesson #6:

You should always question the measure of damage asserted by an Owner.

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THANK YOU!

M. Brandon Waddell

Vincent Serafino Geary Waddell Jenevein, PC

1601 Elm Street, Suite 4100

Dallas, Texas 75201

Direct: (214) 979-7420

Email: [email protected]