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In the California Contractors State License Board’s (CSLB) Summer 2014 Message from the Board Chair, the CSLB’s new Board Chair David Dias voices his concern about the increasing number of consumer complaints alleging predatory practices by C-20 Warm-Air Heating, Ventilating and Air-Conditioning (HVAC) contractors. Reportedly, vulnerable consumers are being taken advantage of after calling an HVAC contractor for simple repairs or routine maintenance. He confirms that the CSLB is “taking steps to warn and weed out this element,” efforts which have included hosting a conference in San Jose in May that brought together industry officials, regulators, and C-20 contractors to discuss HVAC installation-related issues. He further confirmed that the CSLB’s Enforcement Division “will be reinforcing its HVAC scam zero-tolerance policy through targeted undercover sting operations.”

In its CSLB Turns Up the Heat on HVAC Rip-Offs, the CSLB identifies the predatory practices that it intends to curtail:

• Hard-sell tactics to obtain grossly inflated contracts • Misrepresenting work as critical or safety-related, needing immediate correction • Failing to provide the three-day right to rescind a home improvement contract • Failing to obtain building permits • Lack of workers’ compensation insurance or under-reporting employees

As part of the effort to crack down on such practices, the Better Business Bureau has been sharing its consumer complaint files with the CSLB, aiding the CSLB to identify potential violators.

Its efforts will also include workshops that will involve reviewing state service and repair contract laws, including a customer’s 3-day right to rescind a home improvement contract, permit requirements and related inspections from local building departments, and contractors’ responsibilities to maintain workers’ compensation insurance to cover on-site worker injuries.

Additional Source: CSLB Announces 2014 Pilot Program Focused On HVAC Contractors

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In an unusual case, the US Court of Appeals for the Seventh Circuit held, in Gibson v. American Cyanamid Co., et al., that the Wisconsin Supreme Court’s “risk contribution theory” would apply to the manufacturers of lead pigments that were added to commercial paint products until their use was banned in 1978 by the Consumer Product Safety Commission.

The plaintiff suffers from neurological defects which were allegedly caused by the white lead carbonate pigments that were contained in the paint used to paint the house he lived in. The plaintiff could not identify the pigment manufacturer. In these situations, the Wisconsin Supreme Court has developed a risk contribution theory for use a in such litigation. The defendant paint manufacturers argued that this doctrine violated established substantive due process constitutional principles in that it is arbitrary and capricious. Moreover, the Wisconsin legislature recently enacted a statute nullifying this court-made doctrine.

The case was dismissed by the federal trial court, but the Court of Appeals, in a ruling released on July 24, 2014, reversed the trial court. The Court of Appeals noted that the new Wisconsin law has itself been ruled to be unconstitutional by a Wisconsin state court, and it agreed with this ruling. Then applying US Supreme Court precedents, which it holds applies with equal force to state judicial common law rulings, state economic regulation need only be rational and non-arbitrary to satisfy substantive due process standards. As to the defendant companies’ argument that the Supreme Court’s 1998 ruling in Eastern Enterprises v. Apfel, 524 U.S. 498 (1998), fashioned a new rule for applying substantive due process to retroactive federal legislation, the Seventh Circuit notes that Eastern Enterprises was such a fractured decision that it cannot stand for the proposition embraced by the defendants.

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In an opinion filed July 3, 2014, the California Supreme Court provided some clarification to California law concerning an architect’s liability to foreseeable third-party purchasers of residential units for design errors and omissions. In Beacon Residential Community Association v. Skidmore, Owings & Merrill LLP (July 3, 2014) ____Cal.4th ____; 2014 WL 2988058, Cal. July 03, 204 (NO. S208173), the Court held that a principal architect (defined by the Court as an architect who in providing professional design services is not subordinate to other design professionals) of a residential project owes a duty of care to future homeowners.

Beacon concerned a dispute over a residential condominium project in San Francisco. The original developers of the project engaged two architects to provide architectural and engineering services. Although the finished units were rented out for two years after construction, a condominium association had been created prior to construction, and eventually the finished units were sold as condominiums.

The condominium association sued the original developers of the condominiums, along with the architects, alleging numerous design defects. As against the architects, the association asserted causes of action in negligence and violations of California’s Right to Repair Act (Cal. Civil Code sections 895 et seq.). The architects, who had allegedly been paid more than $5 million for their work, demurred on the basis that they owed no duty of care to the association or its individual members. The trial court agreed with the architects that they owed no duty of care, as final design decision authority rested in the developers.

The appellate court reversed the trial court, applying the multi-factor test set out in California’s principal duty of care case, Biakanja v. Irving (1958) 49 Cal.2d 647, to determine that the architects owed the association a duty of care.

On review, the California Supreme Court affirmed the appellate decision. In California, the existence or absence of a duty of care in negligence in the absence of privity is governed primarily by a multi-factor test set out in Biakanja. The Beacon court found that the Biakanja factors demonstrated a duty of care if the facts as alleged in the condominium association’s complaint were proven:

(1) [The architects’] work was intended to benefit the homeowners living in the residential units that [the architects] designed and helped to construct.
(2) It was foreseeable that these homeowners would be among the limited class of persons harmed by the negligently designed units.
(3) [The association’s] members have suffered injury; the design defects have made their homes unsafe and uninhabitable during certain periods.(4) In light of the nature and extent of [the architects’] role as the sole architects on the Project, there is a close connection between [the architects’] conduct and the injury suffered.
(5) Because of [the architects’] unique and well-compensated role in the Project as well as their awareness that future homeowners would rely on their specialized expertise in designing safe and habitable homes, significant moral blame attaches to [architects’] conduct.
(6) The policy of preventing future harm to homeowners reliant on architects’ specialized skills supports recognition of a duty of care. Options for private ordering are often unrealistic for typical homeowners, and no reason appears to favor homeowners as opposed to architects as efficient distributors of loss resulting from negligent design.

The Beacon court further found that a negligence action against the principal architects was permitted by the Right to Repair Act. The architects had argued, in the face of language in the Act addressing “design professionals,” that nevertheless the Right to Repair Act was not intended to impose a duty greater than that imposed under common law. The Beacon court noted that even if the architects were correct regarding the intent of the Act, a duty of care existed at common law.

Beacon is a win for condominium associations and individual homeowners in these circumstances, in that it allows them potential recourse for design defects against the principal design professionals engaged by the developers.

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UPDATE: Sacramento Business Journal, March Madness coming to Sacramento for the first time since 2007 (Nov. 17, 2014) ~ The Sacramento Business Journal confirmed that “[o]n Monday, the National Collegiate Athletic Association said Sacramento will host the first two rounds of the 2017 Division I Men’s Basketball Tournament in the new downtown arena.” The new arena is expected to open the fall of 2016.
Sacramento Business Journal, Demolition for future downtown arena begins Friday (Jul. 30, 2014)

Recently it has been confirmed that demolition for the new Kings’ arena is scheduled to commence in late July 2014. The demolition effort will include 3 square blocks of Downtown Plaza. Downtown Sac.jpgBy late December, the construction site is expected to include a temporary, 30-foot-deep canyon where the mall shops once stood. Although barriers will surround much of the worksite, it has been reported that viewing areas will be set up on two sides of the mall, allowing onlookers to catch a glimpse of the demolition and construction efforts.

Hundreds of construction workers are expected to be involved in the Arena project, working from 6 a.m. to 11 p.m., Monday through Saturday, with a few 24-hour shifts expected. The outside shell and roof of the new arena are expected to be completed by the fall of 2015 and, reportedly, Kings officials are confident that the new facilities will be completed in time to open the 2016 NBA season.

Additional Sources: CBS Sacramento, Court Ruling Clears Way For Sacramento Kings Arena Construction To Begin (Jul. 25, 2014); Sacramento Business Journal, Tentative ruling denies preliminary injunction against arena construction (Jul. 24, 2014); The Sacramento Bee, Mall demolition for Sacramento Kings arena to start in late July (Jun. 25, 2014); Sacramento Kings Arena Plan Headed to Planning Commission April 10; Latest Concepts for Sacramento Kings Arena Unveiled; Turner Construction Company to Build New Sacramento Kings Arena; Sacramento Kings Announce They Will Be The First Pro Sports Franchise To Accept Bitcoin

Photo: Hey Paul, Downtown Sacramento – Creative Commons

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Today, Pillsbury attorneys Julia Judish and Teresa Lewi published their advisory titled New EEOC Developments Expand Employers’ Pregnancy Accommodation Obligations. The Advisory discusses the Equal Employment Opportunity Commission’s recent overhaul of its guidance on pregnancy discrimination issues–broadening anti-discrimination coverage and cautioning employers on their obligation to provide reasonable accommodations to employees with pregnancy-related conditions.

If you have any questions about the content of this blog, please contact the Pillsbury attorney with whom you regularly work or Julia Judish or Teresa Lewi, the authors of this blog.

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The First Court of Appeals, sitting in Houston, has affirmed the decision of an arbitration panel which had ruled in favor of the claims for personal injury and property damages resulting from Forest Oil Corporation’s oil and gas exploration and production activities on the McAllen Ranch in South Texas. The ranch comprises over 27,000 acres, and its value, unimpaired by environmental contamination, is more than $65 million.

The panel of arbitrators ruled 2 to 1 in favor of the McAllen Ranch interests, who alleged that Forest Oil’s operations on the property resulted in the illegal release of hazardous substances and contaminants onto the surface and into the groundwater, and also caused personal injuries to James McAllen, the owner of the ranch.

Contesting the panel’s decision, Forest Oil argued to the Court of Appeals that the arbitrators unlawfully usurped the jurisdiction of the Texas Railroad Commission that has exclusive or primary jurisdiction over such contamination and remediation. The Court of Appeals rejected this argument, and affirmed the award of $15 million in actual property damages, $500,000 in exemplary damages, and $500,000 to James McAllen, and $6 million in attorney’s fees. The Court of Appeals also rejected Forest Oil’s argument that one of the arbitrators had a conflict of interest and the award should not prevail because of this. The case is Forest Oil Corp. v. El Rucio Land and Cattle Company, Inc., et al.

The opinion is very long, but it contains a very useful discussion of primary and exclusive jurisdiction in Texas law.

If you have any questions about the content of this blog, please contact the Pillsbury attorney with whom you regularly work or Anthony Cavender, the author of this blog.

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The Austin Court of Appeals issued an interesting ruling on whether the courts in Texas have the power to review an agency’s refusal to engage in rulemaking. In Texas Commission on Environmental Quality v. Bonser-Latin, et al., the Court of Appeals agreed with TCEQ that the lower court had no jurisdiction over a complaint that the TCEQ unlawfully refused to promulgate new Greenhouse Gas rules.

The lower court eventually ruled for the TCEQ, but denied the agency’s argument that the trial court had no jurisdiction under the Texas Administrative Procedure Act and Section 5.351 of the Water Code. The plaintiffs argued that the TCEQ was obliged under the “public trust doctrine” to engage in this rulemaking. The TCEQ responded that the “public trust doctrine” is displaced once the legislature acts–in this case, to enact the Texas Clean Air Act. The lower court, while ruling for the TCEQ, expressly rejected the agency’s reasoning concerning the public trust doctrine.

In its ruling, the Court of Appeals held that no court has ever held that an agency’s refusal to promulgate rules is reviewable by the courts, and it accordingly vacated the district court’s judgment and dismissed the cause for want of subject-matter jurisdiction, and seemingly ended the conversation about the public trust doctrine in Texas.

If you have any questions about the content of this blog, please contact the Pillsbury attorney with whom you regularly work or Anthony Cavender, the author of this blog.

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On June 20, 2014, Missouri Governor signed into law Senate Bill 529. The Act revises and expands the scope of the Missouri Public Prompt Payment Act and the law relating to public works projects. The revised provisions are operative August 28, 2014. Of note, under existing law, all public works contracts made by a political subdivision for a public works project must provide for prompt payment to the contractor. Under the revised Act, these contracts must also provide for prompt payment of any professional engineer, architect, landscape architect, or land surveyor.

Under existing law, a public owner may retain 5% of the value of a public works contract or up to 10% if it is determined by the public owner and the architect or engineer determine that a higher rate is required to ensure performance. The revised Act provides that a public owner may retain up to 10% if the contractor is not required to obtain a bond because the contract is not estimated to exceed $50,000; the Act requires contractors to furnish a bond when the estimated cost of the project exceeds $50,000 instead of $25,000 as contemplated under the existing law. In turn, retainage could be adjusted prior to completion when work was proceeding satisfactorily and retainage was to be paid after substantial completion of the contract or per contract terms. In such cases, 200% of the value of the remaining work was to be withheld until completion. The Act provides that 150% of the value is to be withheld until completion. In turn, under existing law, contractors were required to pay subcontractors and suppliers when they received payment less any retention not to exceed 10%. The Act lowers the retention to 5%.

The Act further provides that, if the owner determines the work is not substantially completed, the owner must provide a written explanation within 14 calendar days to the contractor. The contractor must then provide the notice to its subcontractors and suppliers. If the explanation is not given by the public body, the public body must pay at least 98% of the retainage within 30 calendar days. In addition, under existing law, when the public owner does not release full payment due because there are specific areas of work or materials it is rejecting, the subcontractors and suppliers involved are not paid for the rejected work. The Act now requires that the subcontractors and suppliers that will not be paid are to be provided a written explanation as to why the work or supplies were rejected.

The Act requires the public owner to include any withheld retainage with final payment of moneys owed to the contractor within 30 days of the due date, and to pay any professional engineer, architect, landscape architect, or land surveyor the amount due within 30 days after receiving an invoice. If full payment is not made, the contracting agency must pay 1.5% interest per month it remains unpaid.

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Judge Richard J. Leon of the US District Court for the District of Columbia has ruled that a federal advisory committee appointed by the FDA to issue a report consistent with the agency’s new authority over the sale of tobacco products was illegally constituted. Three of the voting committee members had conflicts of interest in that they received compensation from companies manufacturing tobacco cessation products, and that they were also frequent expert witnesses in tobacco litigation. The conflicts were so significant that the court held that the committee’s “Menthol Report” was “suspect and untrustworthy”, and barred its use.

The case is Lorillard, Inc. v. US Food and Drug Administration, decided July 21, 2014.

If you have any questions about the content of this blog, please contact the Pillsbury attorney with whom you regularly work or Anthony Cavender, the author of this blog.

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In mid-April 2014, Nebraska Governor signed into law Legislative Bill 961. Of note, it includes revisions to the Nebraska Construction Prompt Pay Act. The Act is set forth in Nebraska Revised Statutes §§ 45-1201 to 45-1210 and Section 8 of L.B. 961. The revised provisions are operative July 18, 2014.

Subdivision (3) of Section 45-1203 is amended to read:

“The owner or the owner’s representative shall release and pay all retainage for work completed in accordance with the provisions of the contract within forty-five days after the project, or a designated portion thereof, is substantially complete. When a subcontractor has performed work in accordance with the provisions of a subcontract and all conditions precedent to payment contained in the subcontract have been satisfied, the contractor shall pay all retainage due such subcontractor within ten days after receipt of the retainage.” (Underline added).

In turn, Subdivision (1) of Section 45-1204 has been amended to read:

“When work has been performed pursuant to a contract, an owner, contractor or subcontractor may only withhold payment… [f]or retainage, in an amount not to exceed the amount specified in the applicable contract, which shall not exceed a rate of ten percent. If the scope of work for the contractor or subcontractor from which retainage is withheld is fifty percent complete and if the contractor or subcontractor has performed work in accordance with the provisions in the applicable contract, no more than five percent of any additional progress payment may be withheld as retainage if the contractor or subcontractor provides or has provided satisfactory and reasonable assurances of continued performance and financial responsibility to complete the work.” (Underline added).

The definitions of contractor, subcontractor and substantially complete have also been revised:

  • The term “contractor” “does not include an individual or an entity performing work on a contract for the State of Nebraska or performing work on a federal-aid or state-aid project of a political subdivision in which the state makes payments to the contractor on behalf of the political subdivision.” Neb. Rev. St. § 45-1202(1).
  • The term “subcontractor” “does not include an individual or an entity performing work as a subcontractor on a contract for the State of Nebraska or performing work on a federal-aid or state-aid project of a political subdivision in which the state makes payments to the contractor on behalf of the political subdivision.” Neb. Rev. St. § 45-1202(6).
  • The term “substantially complete” means “the stage of a construction project when the project, or a designated portion thereof, is sufficiently complete in accordance with the contract so that the owner can occupy or utilize the project for its intended use.” Neb. Rev. St. § 45-1202(7).

Section 8 of L.B. 961 further provides that “Any individual, partnership, firm, limited liability company, corporation, or company may bring an action to recover any damages caused to such person or entity by a violation of the Nebraska Construction Prompt Pay Act. In addition to an award of damages, the court may award a plaintiff reasonable attorney’s fees and costs as the court determines is appropriate.”