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On October 13, 2004, California Governor Edmund G. Brown Jr. appointed Susan Granzella of Sacramento as a new (public) member of the California Contractors State License Board. Prior to the appointment, according to the Governor, Granzella “held several positions at Visa Inc. from 1996 to 2014, including senior director and vice president for technical documentation and audit and compliance coordination for global development.” The CSLB further noted that, in the latter role, Granzella “oversaw Visa’s technical writing and publishing efforts, distributing content internationally to banks and processors, and managed staff in both the United States and India.” Registrar of Contractors Steve Sands swore in Ganzella on October 21, 2014, and her term continues through June 1, 2016. With Granzella’s appointment, there remains only one vacancy on the 15-member Board. Congratulations and welcome!

Additional Information: CSLB, Industry Bulletin # 14-16 (Oct. 22, 2014).

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On October 20, 2014, the U.S. Court of Appeals for the Tenth Circuit unanimously affirmed the lower court’s ruling that the commercial liability insurance policies purchased by Headwaters Resources, Inc. contained unambiguous “pollution exclusion” provisions which excluded Headwaters’ demand that its insurers reimburse its litigation defense costs. The case is Headwaters Resources, Inc. v. Illinois Union Insurance Company and ACE American Insurance Company.

Headwaters constructed a golf course in Chesapeake, Virginia, using fly ash, which is derived from coal ash, as a fill material. Several hundred homeowners sued Headwaters in Virginia state court alleging that that the use of fly ash caused property damages and bodily injuries as a result of the pollution generated by this use of the fly ash. Both insurers denied coverage, and Headwaters sued the insurance companies in a federal district court in Utah. At issue were the policy exclusions which “excise coverage for ‘bodily injury’ and ‘property damage’ that stems from ‘actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants” when combined with at least one of five circumstances enumerated in lettered subparts.”

The Court of Appeals affirmed the lower court’s holding that the pollution exclusion provisions were unambiguous and therefore the policies do not cover these claims; the district court found that the “the complaints in the . . . lawsuits alleged bodily injury and property damage arising out of the actual or threatened dispersal of pollutants from waste that was processed by Headwaters,” and “[t]aken broadly, the complaints allege pollution of the type that falls within the pollution exclusions in all the policies.” The Court of Appeals also noted that Headwaters was free to purchase special purpose coverage for pollution liability, but chose not to do so.

In the Court of Appeals decision, it notes that “[s]ince the 1970’s, the extent to which pollution exclusions apply to preclude coverage in commercial general liability (CGL) policies has been a ubiquitous feature of insurance litigation. Generally speaking, jurisdictions that have addressed the scope of the ‘total pollution exclusion’ fall into one of two camps: (1) courts that apply the pollution exclusions as written because they find them clear and unmistakable; and (2) courts that narrow the exclusions to ‘traditional environmental pollution,’ often because they find the terms of the exclusion to be ambiguous due to their broad applicability.” It also notes that the Utah Supreme Court has not yet weighed in on this debate.

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The Texas Supreme Court confirmed that it will decide an issue of Texas law that was certified to the Court by the U.S. Court of Appeals for the Fifth Circuit. The case is McGinnes Industrial Maintenance Corporation v. The Phoenix Insurance Company; The Travelers Indemnity Company. The issue is whether the receipt of Potentially Responsible Party (PRP) letters and unilateral administrative order, issued pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), from EPA Region 6 is a “suit” that triggers a duty by the insurers to defend, investigate and settle.

McGinnes is in the waste disposal business and, in the 1960s, McGinnes removed waste from a paper mill and released it into three ponds located adjacent to the San Jacinto River. McGinnes is a potentially responsible party at the San Jacinto Waste Pits Superfund site in Harris County, Texas. McGinnes is cooperating with EPA in developing a cleanup plan for the site, but McGinnes is also being sued in state court for past violations of the state environmental laws pertaining to waste cleanups. Its liability could well be assessed at millions of dollars in addition to the cleanup costs. The Fifth Circuit believes that this issue of state law requires clarification by the Texas Supreme Court. This is an important case; different courts in different states have issued rulings coming down on both sides of this issue. No date for oral argument has been scheduled.

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The New Hampshire Electrician’s Board has confirmed that the 2014 National Electrical Code (NEC) will become effective January 1, 2015 and, moreover, that all exams will be on the 2014 NEC starting on October 1, 2014. All New Hampshire licensed master and journeyman electricians will also be required to complete an “approved” 15-hour course on the 2014 NEC between January 1, 2014 and December 31, 2014 regardless of the licensee’s renewal date. See R.S.A. § 319-C:6-c. Each master and journeyman license without verification of the required 2014 NEC continuing education by January 1, 2015 will be invalid until proof of the course is received, and invalid licenses will be treated the same as a lapsed license and subject to the applicable laws for performing electrical installations without being licensed. See id.

Additional Source: State of New Hampshire Electricians’ Board; ECC, Adoption of 2014 edition of National Electrical Code®

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The Nevada State Contractors Board, at its meeting scheduled for October 23, 2014, at 8:45 a.m. by video conference at two of the Board’s offices, is expected to discuss, in its Executive Session, proposed amendments to Nevada Administrative Code § 624.170 concerning remodel of high rise buildings for possible action.

Currently, NAC § 624.170 addresses Class B general building contractor subclassifications and the work authorized for persons licensed in the respective subclassifications:

1.  PREMANUFACTURED HOUSING (subclassification B-1): The fitting, assembling, placement and installing of premanufactured units, modular parts and their appurtenances for the erection of residential buildings which do not extend more than three stories above the ground.
2.  RESIDENTIAL AND SMALL COMMERCIAL (subclassification B-2): The construction and remodeling of houses and other structures which support, shelter or enclose persons or animals or other chattels, and which do not extend more than three stories above the ground and one story below the ground.
3.  SPECULATIVE BUILDING (subclassification B-3): The construction upon property owned by the contractor of structures for sale or speculation.
4.  SERVICE STATIONS (subclassification B-4): The construction of structures and installation of equipment used to perform service upon vehicles.
5.  PREFABRICATED STEEL STRUCTURES (subclassification B-5): The construction with prefabricated steel of structures to be used for the support, shelter or enclosure of persons or animals or other chattels.

Nevada State Contractors Board Office Locations:

2310 Corporate Circle, Suite 200
Henderson, Nevada 89074
9670 Gateway Drive, Suite 100 Reno, Nevada 89521

Additional Source: Nevada State Contractors Board Notice of Meeting (Oct. 23, 2014).

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A few months ago, the U.S. Supreme Court decided the case of CTS Corp. v. Waldburger, 134 S. Ct. 2175 (2014), and held that the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 94 Stat. 2767, as amended, 42 U.S.C. §§ 9601 et seq. (CERCLA), the federal Superfund statute, does not preempt state statutes of repose such as the North Carolina 10 year statute of repose. For example, North Carolina’s “statute prevents subjecting a defendant to a tort suit brought more than 10 years after the last culpable act of the defendant. N.C. Gen. Stat. Ann. § 1-52(16) (Lexis 2013) (‘[N]o cause of action shall accrue more than 10 years from the last act or omission of the defendant giving rise to the cause of action’); Robinson v. Wadford, ___ N.C.App. ___, ___, 731 S.E.2d 539, 541 (2012) (referring to the provision as a “statute of repose”).” The Waldburger decision imperiled toxic tort lawsuits that were filed against the United States on behalf of many plaintiffs who alleged that the drinking water at Camp Lejeune, North Carolina was contaminated.

In response to the Waldburger decision, the North Carolina Legislature amended the state’s statute of repose (Senate Bill 574, Session Law 2014-17), adding a new exception that would purportedly revive groundwater contamination lawsuits pending on the day of the Supreme Court’s decision. Session Law 2014-44 is titled “An Act to Make Technical Amendments to Session Law 2014-17.” Session Law 2014-17 was signed into law on June 20, 2014, and it provides that “is effective when it becomes law and applies to actions arising or pending on or after that date. For purposes of this section, an action is pending for a plaintiff if there has been no final disposition with prejudice and mandate issued against that plaintiff issued by the highest court of competent jurisdiction where the claim was timely filed or appealed as to all the plaintiff’s claims for relief to which this act otherwise applies.”

On October 14, 2014, the Eleventh Circuit reviewed the application of the revised statute in Bryant v. United States, Case No. 12-15424, and agreed that the amendment substantially amended the law and made it retroactive. However, under North Carolina precedent, the court of appeals held that law cannot be applied on a retroactive basis against the United States. The revised law can only apply prospectively if it is not to divest the United States of a vested right, i.e., the availability of a defense under state law. Interestingly, the Eleventh Circuit was obliged to make an educated “guess” as to the application of North Carolina law because there are no procedures in place by which a question can be certified to the North Carolina Supreme Court.

The case has been remanded to the lower court, where the remaining issues can be sorted out, including whether the last act or omission of the government at Camp Lejeune is covered by the statute of repose.

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Effective January 1, 2015, Senate Bill 193, signed into law on July 11, 2014 by Alaska Governor Sean Parnell, increases the required construction contractor bonding amounts as follows:

“…(1) general contractor shall be $25,000;
(2) general contractor with a residential contractor endorsement under AS 08.18.025 who performs exclusively residential work shall be $20,000;
(3) mechanical or specialty contractor or home inspector shall be $10,000; or (4) contractor whose work on one project with an aggregate contract price of $10,000 or less, including all labor, materials, and other items, when the work is not part of a larger or major operation or otherwise divided into contracts of less than $10,000 to evade a higher bonding requirement, shall be $5,000.”

Under the amended law, in lieu of a surety bond, the license applicant may file with the Commissioner a cash deposit or other negotiable security acceptable to the Commissioner in the amount of the required bond.

Additional Source: Alaska Department of Commerce, Community, and Economic Development, New Legislation Affecting Licensure in Alaska

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Today, Pillsbury attorneys Matthew Burke and Craig Becker published their client advisory titled Court of Appeal Holds Transfer Tax Applies to Legal Entity Changes in Ownership. The Advisory discusses the 2nd District Court of Appeal decision in 926 North Ardmore Avenue, LLC v. County of Los Angeles. The Court of Appeal held that Proposition 13 changes in ownership prompted by transfers of legal entity interests should also be characterized as “realty sold,” resulting in the imposition of realty transfer taxes under the California Documentary Transfer Tax Act in cases even where no real property interests are transferred at all.

If you have any questions about the content of this blog, please contact the Pillsbury attorney with whom you regularly work or Matthew Burke or Craig Becker, the authors of this blog.

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Governor Edmund G. Brown Jr. declared the drought in California a state of emergency on January 1, 2014 and directed state officials to take all necessary actions to prepare for these drought conditions. In response, the California Contractors State License Board (CSLB), is doing its part, began expediting applications for C-57 Well Drilling Contractors and encouraging Class “A” General Engineering Contractors that are authorized to perform water supply projects (but not well drilling unless they possess a C-57 Well Drilling classification) to add the C-57 classification to their license. More recently, the CSLB voiced its concern that there may be “price gouging” “occurring in some California counties where the drought has taken a serious toll on individual residential water wells,” identifying by name Tulare and Kern counties. It reminds all contractors and, in particular, C-57 Well Drilling and C-61/D-21 Machinery and Pumps contractors to make sure the prices they are charging are within legal guidelines following the declaration of a state of emergency.

The CSLB cautions that “[t]he marketplace demand for drilling services is not justification for raising prices for the same services that would have been charged prior to the declared state of emergency.” It cites to Subdivision (a) of California Penal Code § 396, which states, in part: “While the pricing of consumer goods and services is generally best left to the marketplace under ordinary conditions, when a declared state of emergency results in abnormal disruptions of the market, the public interest requires that excessive and unjustified increases in the prices of essential consumer goods and services be prohibited.”

With specific respect to contractors, Subdivision (c) of Penal Code § 396 states:

“Upon the proclamation of a state of emergency resulting from an earthquake, flood, fire, riot, or storm declared by the President of the United States or the Governor, or upon the declaration of a local emergency resulting from an earthquake, flood, fire, riot, or storm by the executive officer of any county, city, or city and county, and for a period of 180 days following that declaration, it is unlawful for a contractor to sell or offer to sell any repair or reconstruction services or any services used in emergency cleanup for a price of more than 10 percent above the price charged by that person for those services immediately prior to the proclamation of emergency. However, a greater price increase is not unlawful if that person can prove that the increase in price was directly attributable to additional costs imposed on it by the supplier of the goods, or directly attributable to additional costs for labor or materials used to provide the services, provided that in those situations where the increase in price is attributable to the additional costs imposed by the contractor’s supplier or additional costs of providing the service during the state of emergency, the price represents no more than 10 percent above the total of the cost to the contractor plus the markup customarily applied by the contractor for that good or service in the usual course of business immediately prior to the onset of the state of emergency” (emphasis added).

A violation of Penal Code § 396 is a misdemeanor and could result in county jail imprisonment for up to one year or by a $10,000 fine, or both. Such a violation would also constitute an unlawful business practice and unfair competition under California Business & Professions Code §§ 17200 et seq. and could result in additional civil penalties.

Additional Resource: California Expediting Well Drilling Licenses During Drought

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Recently, a California federal district court, in Taylor v. Shippers Transport Express, Inc., found that a class of current and former truck drivers had been misclassified as independent contractors and not employees by Shippers Transport Express, Inc. (STE). In granting the drivers’ motion for partial summary judgment, the court found that, notwithstanding that the drivers and STE’s agreement contemplated that the drivers were independent contractors, the drivers were STE employees premised, in part, on its findings that STE not only retained the right to exercise control over the manner and means of the truckers’ accomplishing the desired results, but it also exercised this control. The order was issued in Taylor v. Shippers Transport Express, Inc., CV 13-02092 BRO (PLAx) (C.D. Cal. September 30, 2014).

Plaintiffs represent a class of truck drivers operating out of STE’s yards in Carson and Oakland, California; Plaintiffs’ agreements with STE confirmed that they were independent contractors. STE is a trucking and logistics company that provides land transportation services for ocean containers to and from international ports in Los Angeles and Oakland, California; STE’s logistical operations, including scheduling the pick-up and delivery of containers, are performed by regular employees. Plaintiffs filed suit against STE, alleging employment-related claims, and later amended the complaint to add SSA Marine, Inc. (SSA). The amended complaint alleges seven causes of action under California law; six of the causes of action are premised on alleged violations of California’s Labor Code. On April 28, 2014, Plaintiffs filed a motion for partial summary judgment raising the sole issue that STE cannot, as a matter of law, satisfy its burden of establishing that the class members are independent contractors, as STE alleges in its second affirmative defense. Defendants opposed the motion and also filed a motion for summary judgment. The Court heard oral argument on both motions on September 29, 2014, and the Court issued its ruling on September 30, 2014, granting Plaintiffs’ motion for partial summary judgment and denying the Defendants’ motion for summary judgment.

In its order, the Court noted at the outset that, while typically determining whether an individual should be considered an employee and not an independent contractor is involves a factual inquiry that should not be determined on summary judgment, the Plaintiffs had established a prima facie case of employment and that they were employees under the common law analysis set forth in S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341 (Cal. 1989). The Court first focused its analysis on the amount of control that STE retained the right to exercise over the drivers. Relying on the express language in the Plaintiffs’ agreements with STE, the Court found that “STE retains the right under these provisions to terminate a Driver immediately if he or she breaches any provisions of the transportation agreement.” It further found that there was no limitation on STE’s right not to renew the Drivers’ contracts; instead, STE could decide not to renew the contract for any reason or for no reason at all. It ultimately found “that this power evidences a right to control that is ‘a substantial indicator of an at-will employment relationship.'” In addition, [a]fter considering the undisputed facts in the record, the Court determine[d] that the degree of control exercised by STE over the Drivers demonstrates that it has ‘retained all necessary control over the drivers’ work.'”

Applying the secondary Borello factors, the Court found the facts “militate in favor of finding an employment relationship to exist between STE and the Drivers;” the Borello factors, as applied in Air Couriers International v. Employment Development Department, 150 Cal. App. 4th 923 (Cal. Ct. App. 2007), include “some drivers had worked for the courier company for a number of years, which was ‘another factor inconsistent with independent contractor status’; the drivers were performing an integral and entirely essential aspect of the courier company’s business; the drivers were required to use the company’s forms in order to be paid; the drivers were paid on a regular schedule; the courier company sent the drivers to each delivery, provided deadlines, and required them to notify the dispatchers when the delivery was completed; the courier company provided placards for the drivers’ vehicles; the drivers delivered to the courier company’s customers, rather than to their own customers; and the courier company set the rates that were charged to the customers, billed the customers, and collected the payment.”

It also found that, in light of light of Dilts v. Penske Logistics, LLC, 12-55705, 2014 WL 4401243 (9th Cir. Sept. 8, 2014), Plaintiffs’ claims alleged in their first amended complaint are not sufficiently “related to” prices, routes, or services to be preempted by the Federal Aviation Authorization Administration Act, denying Defendants’ motion for summary judgment on this basis. This order follows the California Supreme Court’s recent order in The People ex rel. Kamala D. Harris v. Pac Anchor Transportation, Inc., Case No. S194388 (July 28, 2014), affirming that California’s unfair competition law, Cal. Bus. and Prof. Code §§ 17200 et seq., is not preempted by federal law, which appears to follow the Dilts decision; Supreme Court remanded the matter to the trial court to address the merits.

Additional Resource: U.S. Department of Labor, $10.2M awarded to fund worker misclassification detection, enforcement activities in 19 state unemployment insurance programs (Sep. 15, 2014); Employees and Independent Contractors and Day Laborers … Oh My!; Kansas Department of Labor, Independent Contractor or Employee Fact Sheet (Jun. 2012)