Gravel2Gavel Construction & Real Estate Law Blog

In a decision released on June 25, 2014, the US Court of Appeals for the Second Circuit held that ASARCO LLC could not maintain CERCLA cost recovery actions against the trustees of residuary trusts created by the will of John D. Rockefeller, Sr. ASARCO, as part of its emergence from Chapter 11 bankruptcy, paid the US, the State of Washington, and the Port of Everett, Washington $50.2 million to settle pending CERCLA claims at two Superfund sites in Washington State. ASARCO then filed its contribution action against the trustees in federal court on the theory that the remediation costs were “fairly attributable” to the actions of its predecessors at these sites, corporations controlled by Rockefeller that were engaged in mining and smeltering operations nearly 100 years ago. The Second Circuit, affirming the lower court, rejected ASARCO’s claims on the basis that they were barred by the relevant CERCLA statute of limitations, and that ASARCO was not a subrogee entitled to take advantage of another, more generous CERCLA statute of limitation. The case is ASARCO LLC v. Goodwin, et. al.

This ruling follows by only a few days a similar decision by the Tenth Circuit in the case of ASARCO LLC v. Union Pacific Railroad Company, et. al. ASARCO argued that these defendants (the Union Pacific Railroad, the Union Pacific Corporation, Pepsi-Cola, and a bottling company) were also potentially responsible parties at the Vasquez site in Denver, Colorado. ASARCO paid over $1.5 million to settle these claims. The court of appeals held that ASARCO’s post-bankruptcy claims were barred by the relevant CERCLA statute of limitation, and again, that ASARCO could not be considered a subrogee entitled to the CERCLA statute of limitations applicable to subrogees.

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.

As discussed more fully in my advisory titled EPA Proposes to Eliminate Dual Standard for “All Appropriate Inquires” under CERCLA, on December 30, 2013, EPA published a final rule authorizing use of ASTM E1527-13 to comply with the Appropriate Inquiries (“AAI”) requirements for the innocent landowner, bona fide prospective purchaser, and continuous property owner defenses to CERCLA liability. 78 Fed. Reg. 79319. This final rule did not remove reference to the 2005 standard. Thus, although EPA made clear that reliance on the updated ASTM Phase I standard would satisfy a purchaser’s AAI obligations under CERCLA, EPA left significant uncertainty as to whether a Phase I without agency file review was sufficient to meet AAI requirements because EPA did not remove the reference to the 2005 Phase I standard. On June 17, 2014, EPA proposed to amend the AAI Rule in 40 CFR 312 to remove the reference to ASTM E 1527-05. According to EPA’s proposal, the “proposed action removes the reference to a standard that ASTM International no longer recognizes as current and that it no longer represents as reflecting its current consensus-based standard.” 79 Fed. Reg. 34480.

Today, Pillsbury attorneys Matthew Burke and Craig Becker published their advisory titled Ocean Avenue LLC v. County of Los Angeles Affirmed; AB 2372 Passes Assembly. The Advisory discusses the California Court of Appeal for the Second Appellate District’s June 3, 2014 order affirming the Superior Court ruling in Ocean Avenue LLC v. County of Los Angeles, holding that even though 100 percent of an entity was sold, a reassessable change in ownership of the entity’s real property did not occur because no one person obtained more than 50 percent of the entity. It further discusses how Assembly Bill 2372 would change that result by requiring reassessment of an entity’s realty if 90 percent or more of its ownership interests were sold within a three year period, even if no one owner acquired more than 50 percent.

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.

For most industries, attracting both male and female consumers is a must, but successfully engaging both genders is not always easy. It is becoming more difficult given that both genders’ roles continue to change and their views on gender roles are ever evolving. In Monster Myth: Marketing To Women Alienates Men, Forbes contributor Ayesha Mathews-Wadhwa contends that the “monster myth: marketing to women will alienate men” is a “misconception [] entrenched in the modern marketing world but is especially strong in ads for liquor and cars. Slick, dark shots open on a woman gazing seductively at the camera while Jason Bourne-esque music swells.” She, however, cautions that a “‘shrink-it-and-pink-it’ approach” to marketing to women hasn’t work and that “tone-deaf brands equal a tuned out audience.” She further cautions that it may be even more difficult with the new millennial generation, citing to the New York Times bestseller, The Athena Doctrine, which reportedly confirms that “millennials have a fundamentally stronger view of femininity and the role of women in society.”

Ayesha Mathews-Wadhwa encourages marketers identify who is the “true chief decision maker” buying your products or controlling the purchasing decisions. Successfully marketing to these individuals likely will be critical to your company’s successful marketing program. If the true chief decision makers are woman, Ayesha Mathews-Wadhwa suggests five ways to reach your female audience:

1. Enchant — “… How does your brand make your customer feel… detailed attention and care is what customers remember, and what elevates something that is okay into something worth talking about…”
2. Help her do less — “…It’s the brands that provide customers with a serene moment, or an ‘it’s-so-easy-it’s-magic’ experience that get a hooked, loyal audience…”
3. Give her more — “…With both genders under a time crunch, it’s important to make sure “more” is tempered with value and–for women especially–aesthetic and function…”
4. Assume nothing — “… brands that go beyond these stereotypes to change [] tired approaches can have a powerful impact…”
5. Cultivate conversation — “It’s a simple fact: if a woman likes your product, everyone will hear about it. So give her multiple ways to talk to you–and about you–within her circle of influence….”

Although not all of these approaches resonate with me, several do. How are you marketing to these “high-touch communicators”?

Additional Source: Forbes, The World’s 100 Most Powerful Women

In an Federal Communications Commission (CMC) matter, Sorenson Communications, Inc. v. FCC, the DC Circuit vacated an interim rule promulgated by the FCC without going through notice and comment. The agency argued that it had “good cause” to dispense with the Administrative Procedure Act (APA) in this instance. The court disagreed, and articulated the court’s standard of review in assessing such claims. The inquiry is to be “meticulous and demanding”, and the exception in the APA is to be “narrowly construed”. The court’s review of the claimed exception is de novo, and here the agency’s argument that it was reacting to a fiscal emergency was spurious, especially as there was no support in the record to countenance such a departure from the normal APA procedures. The court recognized that it had allowed a few exceptions, but only where a real emergency involving a threat to life or property demanded quick action.

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.

Additional Source: Important APA Issue Awaits Supreme Court’s Review

In LAN/STV, a Joint Venture of Lockwood, Andrews & Newman, Inc. v. Martin K. Eby Construction Company, Inc., the Texas Supreme Court considered “whether the rule permits a general contractor to recover the increased costs of performing its construction contract with the owner in a tort action against the project architect for negligent misrepresentations — errors — in the plans and specifications.” Under the circumstances presented, the Court concluded that “the economic loss rule does not allow recovery” for the general contractor’s claim against LAN/STV for negligent misrepresentation, reversing the judgment of the Court of Appeals and rendering judgment for the architect; the “economic loss rule,” a common law doctrine, restricts recovery of purely economic damages unaccompanied by injury to the plaintiff or its property.

The Dallas Area Rapid Transportation Authority (“DART”) contracted with the architect to prepare plans, drawings, and specifications for the construction of a light rail transit line from Dallas’s downtown West End to the American Airlines Center about a mile away. LAN/STV was contractually responsible to DART for the accuracy of the plans, as was DART to the general contractor, but LAN/STV owed the general contractor no contractual obligation. Days after beginning construction, the general contractor discovered that LAN/STV’s plans were full of errors; approximately 80% of LAN/STV’s drawings had to be changed. The required changes disrupted the general contractor’s construction schedule and required additional labor and materials, resulting it what the general contractor calculated to be nearly a $14 million loss on the project and a 25-month job instead of a 7-month job.

In addition to pursuing a claim against DART, the general contractor sued LAN/STV, asserting causes of action for negligence and negligent misrepresentation. After the general contractor and DART settled their dispute, the general contractor’s claim against LAN/STV went to trial. The jury found in favor of the general contractor, but they also apportioned responsibility 45% to LAN/STV, 40% to DART, and 15% to the general contractor. The trial court agreed that “LAN/STV should be liable only for its apportioned share of the damages,” rendering judgment for the general contractor in the amount of $2.25 million plus interest. Both the general contractor and LAN/STV appealed.

On appeal, the Court noted that “… Texas courts of appeals have uniformly applied the economic loss rule to deny recovery of purely economic losses in actions for negligent performance of services.” It recognized the typical backdrop for construction projects: “Construction projects operate by agreements among the participants. Typically, those agreements are vertical: the owner contracts with an architect and with a general contractor, the general contractor contracts with subcontractors, a subcontractor may contract with a sub-subcontractor, and so on. The architect does not contract with the general contractor, and the subcontractors do not contract with the architect, the owner, or each other.” Even so, it concluded that it is “beyond argument that one participant on a construction project cannot recover from another — setting aside the architect for the moment — for economic loss caused by negligence.” It explained that “[I]f the roofing subcontractor could recover from the foundation subcontractor damages for extra costs incurred or business lost due to the latter’s negligent delay of construction, the risk of liability to everyone on the project would be magnified and indeterminate — the same result Justice Holmes rejected in [Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303 (1927).].”

With regard to whether an architect should be treated differently, it confirmed that “the contractor’s principal reliance must be on the presentation of the plans by the owner, with whom the contractor is to reach an agreement, not the architect, a contractual stranger.” It explained that “[t]hough there remains the possibility that a contractor may not do so, we think the availability of contractual remedies must preclude tort recovery in the situation generally because, as stated above, ‘clarity allows parties to do business on a surer footing’.” It found no “reason not to apply the economic loss rule to achieve this end.”

Additional Source: The Supreme Court of Texas Blog, The economic loss rule in Texas is more restrictive than the Restatement (Jun. 23, 2014)

UPDATES: Ayala v. Antelope Valley Newspapers Inc., ___ Cal. ___ (Jul. 1, 2014)–California Supreme Court clarifies the test for independent contractor status; Ruiz v. Affinity Logistics Corp., 2014 BL 166620, No. 12-56589 (9th Cir. Jun. 16, 2014)–Ninth Circuit found “overwhelming evidence” that the defendant controlled details of the delivery drivers’ work and, accordingly, the drivers were employees not independent contractors under California law, citing S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 769 P.2d 399 (Cal. 1989).

The California Contractors State License Board (CSLB) recently issued an Industry Bulletin reminding contractors of the importance of properly classifying workers as employees or independent contractors to avoid being subject to penalties and fines. Helpful information can also be found on the California Department of Industrial Relations’ website, including, for example, a publication on independent contractors versus employees.

The CSLB reminds contractors that the California Employment Development Department (EDD) provides free classroom style and online training to help contractors to learn their obligations under the state employer reporting laws. Its Industry Bulletin lists some of the EDD tax seminars offered and includes links to EDD’s website for these seminars:

• Federal/State Basic Payroll Tax Seminar
• Quick Course in Federal and State Payroll Taxes
• State Labor Law and Payroll Tax Seminar
• Employee or Independent Contractor Seminar
• State Payroll Tax Workshop
• How to Manage Unemployment Insurance Costs Tax Seminar
• Audits and Appeals Payroll Tax Seminar
• Employment Taxes and the Nonprofit Organization Seminar
• Household Employers Payroll Tax Seminar
• State Basic Payroll Tax Seminar
• Avoid Errors on Payroll Tax Reporting Seminar

It also notes that the Department of Industrial Relations and Internal Revenue Service offer State Labor Law and Federal Payroll Tax presentations at some of the EDD seminars.

Additional Source: U.S. Department of Labor, $10.2M awarded to fund worker misclassification detection, enforcement activities in 19 state unemployment insurance programs (Sep. 15, 2014);

Photo: JoshBerglund19, Wax Wizard of Oz, Taken Aug. 5, 2007 – Creative Commons

The U.S. Supreme Court has agreed to review two decisions of the DC Circuit, which held that “when an agency has given its regulation a definitive interpretation, and later significantly revises that interpretation, the agency has, in effect amended its rule, something it may not accomplish [under the Administrative Procedure Act without notice and comment”. The cases to be reviewed are Perez, et al. v. Mortgage Bankers Association, et al., and Nickols, et al. v. Mortgage Bankers Association, and they involve the Department of Labor’s (DOL) application of the Fair Labor Standards Act (FLSA) to mortgage loan officers: Are they exempt from the FLSA’s overtime wage requirements, or are they not?

In the space of just a few years (2006 and 2010), the DOL issued two conflicting interpretations of the FLSA without providing notice and comment to the regulated community, in particular, the Mortgage Bankers Association. While the APA requires federal agencies to provide notice and comment when they engage in rulemaking, the law also provides that the requirement to provide notice and comment does not apply to interpretative rules.

The DC Circuit’s rationale, in ruling in both cases, which has not been followed by all the federal courts of appeal, is that when a definitive interpretation is so closely intertwined with a regulation, a significant change in the interpretation can be regarded as a repeal or amendment of the rule itself, necessitating these APA protections.

The consequences of the Court’s eventual decision could be very significant because most federal agencies utilize interpretative rules as an expedient and useful way to administer and implement the growing number of federal rules and policies, and subjecting this procedure to the APA could make the administrative process more equitable yet somewhat more cumbersome.

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.