Gravel2Gavel Construction & Real Estate Law Blog

You can never be 100% sure of what you will find below the surface when you begin excavating on a construction project. But I’m willing to bet construction workers in Seattle, Washington never anticipated finding a very rare 10,000 year old mammoth tusk.

An employee of a plumbing subcontractor uncovered the tusk with a shovel and immediately stopped digging to contact the general contractor. The amateur archeologist’s boss said “it was more exciting than the time they found a jar of money someone had buried in a backyard.”

The careful excavation of the mammoth tusk will no doubt delay construction of the residential building being developed by AMLI Residential. Nevertheless, AMLI Residential Senior Vice President, Scott Koppelman, said “the scientific and educational benefits of this discovery clearly outweigh the costs and delay. This is an exciting discovery for our local Northwest history.”

Find the whole story, with photos, here.

Today, Pillsbury attorneys William M. Sullivan, Jr., and Benjamin J. Cote published their advisory titled Feds’ Reliance on Environmental Activism Underscores Need for Lacey Act Compliance. This advisory discusses the search warrant recently executed by U.S. Customs and Fish and Wildlife Service agents on a Virginia-based flooring wholesaler premised on allegations that the company had illegally imported wood in violation of the Lacey Act, 16 USC § 3371 et seq. This development bolsters three significant trends in Lacey Act enforcement that companies engaged in the purchase, manufacture or sale of wood products should take note of.

Privacy has and continues to be a hot topic in California and across the nation. On February 13, 2014, the California Office of the Attorney General confirmed that the “[c]ontinuous videotaping surveillance of truck drivers during their on-the-job driving does not constitute a misdemeanor under [California] Labor Code section 1051

Brewer Corporation v. Point Center Financial, Inc.
Fourth Appellate District, Division 1 (San Diego County)
January 31, 2014
Direct contractors who fail to serve a preliminary 20-day stop payment notice on the project’s construction lender do so at their own peril. The California Court of Appeal (hereinafter, the “Court”) recently decided whether a direct contractor, who is not also a general or prime contractor, must serve a preliminary 20-day notice as a prerequisite to enforcing its stop notice claim against a construction lender. In Brewer Corporation v. Point Center Financial, Inc., Fourth Appellate District Division 1 (San Diego County), January 31, 2014, the Court held that the trial court erred as a matter of law when it concluded that respondent, direct contractor (“Direct Contractor”), was not required to serve the appellant, the project’s construction lender (“Lender”), with a preliminary notice for its stop notice claim. Full write up, after the jump.

In coming to this conclusion, the Court interpreted California Civil Code section 3097 (Former Civ. Code, §§ 3082-3267; Civ. Code, §§ 8000-9566, effective July 1, 2012 (Stats. 2010, ch. 697, § 16)), which required a preliminary notice be given under the following circumstances:

“(a) Except one under direct contract with the owner … every person who furnishes labor, service, equipment, or material [to a work of improvement] shall, as a necessary prerequisite to the validity of any … notice to withhold, cause to be given to the owner or reputed owner, to the original contractor, or reputed contractor, and to the construction lender, if any, or to the reputed construction lender, if any, a written preliminary notice as prescribed by this section.

(b) Except the contractor… all persons who have a direct contract with the owner and who furnish labor, service, equipment, or material [to a work of improvement] shall, as a necessary prerequisite to the validity … of a notice to withhold, cause to be given to the construction lender, if any, or to the reputed construction lender, if any, a written preliminary notice as prescribed by this section.”

(Italics added in Brewer).

The parties did not dispute that the Direct Contractor failed to provide preliminary notice to the Lender. Because section 3097(a) plainly stated that one under direct contract with the owner is exempt from the preliminary notice requirement, the Court turned to section 3097(b) as the only source which could potentially require the Direct Contractor to give written notice to the Lender. Reading the plain language of the statute, the Court observed that a direct contractor must give notice to the lender unless it qualified as “the contractor.”

The Court noted that the term “original contractor” as used in section 3097(a) was defined but the term “the contractor” as used in section 3097(b) had no express definition. Section 3095 defined the term “original contractor” as “any contractor who has a direct contractual relationship with the owner.” Without its own definition, the Court concluded that “the contractor” must have a different meaning than “original contractor.”

The Court relied on precedent to aid in its interpretation of the term “the contractor.” The Court looked to Korherr v. Bumb (9th Cir., 1958) 262 F.2d 157, 161 which observed that the term “the contractor” referred to “the general or prime contractor” in its interpretation of the predecessor to section 3097. The Court also looked to Shady Tree Farms v. Omni Financial (2012) 206 Cal.App.4th 131, 138 which stated the use of “the” indicated a single person, i.e., the general or prime contractor. As such, section 3097(b)’s carve out for “the contractor” meant that only the general or prime contractor was exempt from the section’s requirements.

Not satisfied, the Court also relied on the amendments to the mechanic’s lien laws to support its conclusion that “the contractor” could only mean the general or prime contractor. In deciding to amend the mechanic’s lien law in 2010, the Legislature sought to “modernize and clarify existing law.” The Legislature specifically noted that section 3097(b) was ambiguous as to whether a general contractor was required to give preliminary notice to a construction lender on a private work. The Legislature amended section 3097 to clarify that a “claimant with a direct contractual relationship with an owner or reputed owner is required to give preliminary notice only to the construction lender or reputed construction lender, if any.” (Current, Civ. Code § 8200, subd. (e)). This amendment resolved the ambiguity recognized by the Legislature by requiring any direct contractor to serve a preliminary notice on the lender.

Relying on previous interpretations of the predecessor to section 3097, and the recent amendments to the mechanic’s lien laws, the Court concluded that the exception to providing notice to the lender for “the contractor” in section 3097(b) only applied to general or prime contractors. Thus a direct contractor, who is also not the general or prime contractor, must comply with the 20-day preliminary notice provisions when seeking to enforce a stop payment notice claim against a construction lender.

New Jersey’s State Board of Examiners of Heating, Ventilating, Air Conditioning and Refrigeration (HVACR) Contractors (Board) has extended the operative date of its regulations, N.J.A.C. 13:32A, implementing the “State Heating, Ventilating, Air Conditioning, and Refrigeration Contracting License Law”, N.J.S.A. 45:16A-1 et seq. (Act), to March 1, 2014. The Board will not accept applications or regulate the practice of HVACR contractors until then. Due to this change, the Board has confirmed that it will be accepting applications for current practitioners (“grandfathering” applications) until September 1, 2014.

On March 1, 2014, the Board will begin accepting applications for licensure. Its regulations prescribe the application procedure. Section 45:16A-26 of the Act also authorizes the Board to issue a Master HVACR license for 6 months following the effective date of the Act without examination to (a) any licensed master plumber who has been engaged in the HVACR business for at least 2 years prior to the date of his/her application for a Master HVACR license or (b) any person who has been engaged as a HVACR contractor for at least 2 years prior to his/her date of application for a Master HVACR license (collectively a “grandfathering” application”). An individual who does not submit a grandfathering application by September 1, 2014, or who does not qualify for grandfathering, will be required to apply through the Board’s regular licensing process and show that he/she has completed the requisite education and must pass the Board’s licensing examination.

Also note that New Jersey Assembly Bill 2456, introduced on February 6, 2014, proposes to exempt from the Act’s licensing requirement a person who performs service, repair or maintenance work necessary for the continued normal performance of HVACR systems if that person is working for an employer as an employee and that work is being performed in any of the following locations that are owned or operated by the employer: (1) a general hospital licensed pursuant to P.L.1971, c.136 (C.26:2H-1 et seq.); (2) a building that contains a steam boiler, pressure vessel or refrigeration plant, which is subject to test and inspection pursuant to R.S.34:7-1 et seq.; and (3) a casino-hotel facility operated under the provisions of the “Casino Control Act,” P.L.1977, c.110 (C.5:12-1 et seq.), which includes any building containing HVACR systems operated by one or more casino-hotel facilities as part of an agreement or arrangement to share systems. The Act would also clarify the definition of heating, ventilating, air conditioning, and refrigeration.

Additional Resources: N.J. Volume 45, Issue 20 (Oct. 21, 2013); N.J. Volume 45, Issue 13 (Jul. 1, 2013); N.J. Volume 45, Issue 10 (May 20, 2013); N.J. Volume 45, Issue 8 (Apr. 15, 2013); N.J. A.B. 2456

Beginning January 1, 2014, California has replaced the Enterprise Zone Hiring Credit with the New Employment Credit and the California Competes Credit, each of which may be used to offset the Personal Income Tax and Corporation Tax. For more information, today, Pillsbury attorneys, Jeffrey M. Vesely, Paul Casas and Annie H. Huang published their advisory titled Deadline Approaching for California’s New Employment Credit, which discusses the New Employment Credit.

Additional Sources: Pillsbury Advisory, GO-Biz Finalizes Proposed California Competes Tax Credit Regulations (Feb. 11, 2014); Pillsbury Advisory, GO-Biz Releases California Competes Tax Credit Draft Proposed Regulations (Dec. 4, 2013)

For taxable years beginning on and after January 1, 2014 and before January 1, 2025, the California Competes Tax Credit will be allowed against the net tax in the amount allocated by the California Competes Tax Credit Committee. A taxpayer must enter into a written agreement with the Governor’s Office of Business and Economic Development’s (GO-Biz) which sets forth the amount of credit to be allocated to the taxpayer. Taxpayers may negotiate the amount of credit, which is based a variety of criteria aimed towards expanding and retaining businesses in California.

On February 11, 2014, Pillsbury attorneys Jeffrey M. Vesely, Paul Casas and Annie H. Huang published their advisory titled GO-Biz Finalizes Proposed California Competes Tax Credit Regulations. The advisory discusses GO-Biz’s release of its final proposed regulations on the California Competes Tax Credit.

Additional Resources: Pillsbury Advisory, GO-Biz Releases California Competes Tax Credit Draft Proposed Regulations (Dec. 4, 2013); Governor’s Office of Business and Economic Development; State of California Franchise Tax Board; California Competes Tax Credit FAQ

UPDATE: CSLB, New C-22 Asbestos Classification Update; CSLB, Proposed New C-22 Asbestos Classification in the Works (Apr. 2, 2014)

The California Contractors State License Board (CSLB) recently posted notice of a proposal to add to its regulations located at Title 16, Division 8, Article 3 of the California Code of Regulations (CCR) sections governing an asbestos abatement contractor classification. Any person interested may present statements or arguments orally or in writing at the hearing to be held at the CSLB’s offices located at 9821 Business Park Drive, Sacramento, California 95827, at 11:00 a.m. on March 25, 2014. Written comments — including those submitted by mail, facsimile or email — must be received by the CSLB not later than 5:00 p.m. on March 24, 2014 or at the hearing.

As set forth in the notice, the proposal is to adopt regulations to establish a specialty classification for an asbestos abatement contractor, including the related scope of work. The proposed specific provisions of § 832.22 are:

 Subsection (a) establishes the scope of work for the C-22 – asbestos abatement specialty classification that shall be done in accordance with Division of Occupational Safety and Health (DOSH) requirements.
 Subsection (b) requires DOSH registration (or an active application for registration in process) for asbestos classification holders.
 Subsection (c) requires proof of DOSH registration within 90 days after the asbestos abatement contractor license is issued, if applicable.
 Subsection (d) establishes experience requirements for applicants for the asbestos abatement contractor classification.
 Subsection (e) requires proof of current DOSH registration as a condition precedent to the renewal of an asbestos abatement contractor license.
 Subsection (f) limits the scope of work of the C-22 – asbestos abatement classification to exclude other construction-related duties or hazardous substance removal or remediation unless the asbestos abatement contractor is otherwise duly licensed to do so.

The proposed specific provisions of § 833 are:

 Subsection (a) clarifies the stand-alone nature of the C-22 – asbestos abatement contractor classification.
 Subsection (b) clarifies that in order for a Class B – general building contractor to contract for any project that includes asbestos abatement work, he/she must hold the C-22 – asbestos abatement classification or the § 7058.5 asbestos certification and DOSH registration or subcontract with an appropriately licensed contractor.
 Subsection (c) clarifies the overlay nature of the § 7058.5 asbestos certification, in that it operates in conjunction with other classification(s) held by the licensed contractor.
 Subsection (d) allows for the waiver of the written trade examination for the C-22 – asbestos abatement contractor classification under certain

The proposed text of the regulations is:

Ҥ 832.22. Class C-22 РAsbestos Abatement Contractor.

(a) An asbestos abatement contractor performs abatement, including containment, encapsulation, or removal, and disposal of asbestos containing construction materials, as defined in Section 6501.8 of the Labor Code, in and on buildings and structures. All work performed and all documentation prepared by an asbestos abatement contractor shall be done in accordance with regulations and requirements of the Division of Occupational Safety and Health (DOSH) of the Department of Industrial Relations.

(b) The Board shall not issue an asbestos abatement contractor license unless the applicant or contractor is duly registered with DOSH pursuant to Section 6501.5 of the Labor Code or has an active application for registration in process with DOSH.

(c) Within 90 days after the asbestos abatement contractor license is issued, the contractor shall submit to the Board proof that he or she is duly registered with DOSH pursuant to Section 6501.5 of the Labor Code.

No asbestos abatement work shall be performed nor documentation prepared until the contractor has submitted proof of his or her DOSH registration to the Board. Failure of a licensee to provide proof of current registration with DOSH within 90 days after issuance shall result in the automatic suspension of the license or removal of the C-22 – asbestos abatement contractor classification at the end of the 90 days.

(d) Every applicant for the C-22 – asbestos abatement contractor classification must have had, within the last 10 years immediately preceding the filing of the application, not less than four years of experience as a journeyman, foreman, or supervising employee working for a licensed contractor who holds the C-22 – asbestos abatement contractor classification or the asbestos certification, as defined in Section 7058.5 of the Code, and DOSH registration.

(e) The Board shall require as a condition precedent to the renewal of an asbestos abatement contractor license that the licensee have on file proof of current registration with DOSH pursuant to Section 6501.5 of the Labor Code.

(f) This classification does not include any addition to or alteration, repair, or rehabilitation of the permanently retained portions of such buildings and structures. Hazardous substance removal and remediation, as defined in Section 7058.7 of the Business and Professions Code, are specifically not included in this classification.”

Ҥ 833. Asbestos Classification and Certification Limitations and Examination Requirement.
(a) The C-22 – asbestos abatement contractor classification shall operate as a stand-alone specialty contractor classification for asbestos abatement work, notwithstanding any other classification held by the licensed contractor.
(b) No general building contractor, as defined in Section 7057 of the Code, shall contract for any project that includes asbestos abatement work unless the general building contractor holds the C-22 – asbestos abatement contractor classification or the asbestos certification, as defined in Section 7058.5 of the Code, and DOSH registration or unless the general building contractor subcontracts with an appropriately licensed contractor.
(c) The asbestos certification, as defined in Section 7058.5 of the Code, shall operate in conjunction with other classification(s) held by the licensed contractor. No licensed contractor who holds the asbestos certification shall contract for any project that includes asbestos abatement work in a trade for which the contractor is not licensed, unless the licensee also holds the C-22 – asbestos abatement contractor classification.
(d) The Registrar may waive the trade examination, pursuant to Section 7065.3, for the C-22 – asbestos abatement contractor classification for a licensed contractor who holds the asbestos certification, as defined in Section 7058.5 of the Code, upon application and conclusive showing by the licensee that he or she possesses not less than four years journey-level experience in the C-22 – asbestos abatement contractor classification within the last 10 years immediately preceding the filing of the application.
The licensee shall have obtained the asbestos certification after having passed the written asbestos certification examination and shall have held the asbestos certification in active and good standing throughout the four-year experience period at a minimum.”

The proposed regulatory action will allow the existing asbestos certification to continue in its current state as an overlay to classification(s) held by the certification holder and will establish a stand-alone asbestos abatement classification with appropriate experience and examination requirements. It will also allow contractors who focus their asbestos abatement work in a limited number of classifications to remain with the existing asbestos certification and will allow contractors who specialize in asbestos abatement work throughout a building to obtain the new asbestos abatement specialty classification. Ultimately, the new regulations will expand the avenues through which a licensed contractor can be authorized to perform asbestos abatement work.

Inquiries or comments concerning the proposed administrative action are to be addressed to:

Contractors State License Board 9821 Business Park Drive Sacramento, CA 95827 Attn: Betsy Figueira (916) 255-3369 (916) 255-6335 (FAX)
Betsy.Figueira@cslb.ca.gov The backup contact person is:
Karen Robinson (916) 255-4298 (916) 255-6335 (FAX)
Karen.Robinson@cslb.ca.gov

Additional Sources: Contractors State License Board; California Contractors State License Board Confirms Asbestos Certification Does Not Authorize Universal Removal/Abatement

On February 6, 2014, Pillsbury attorneys Riaz A. Karamali and Didi S. Chow posted their advisory titled California’s New LLC Law: Next Steps for California LLCs. The advisory discusses the California Revised Uniform Limited Liability Company Act (New Act), which supersedes the California’s Beverly-Killea Limited Liability Company Act (Old Act), and a number of substantive changes under the New Act that may adversely affect existing California limited liability companies (LLC) unless they amend their operating agreements.

Additional Sources: Pillsbury Winthrop Shaw Pittman LLP, LLCs Can Finally Become Licensed California Contractors (Oct. 10, 2011)