TYPE I DIFFERING SITE CONDITIONS CLAIM IS NOT EASY TO PROVE

shutterstock_397981669A differing site condition claim will almost universally result in both a cost and time impact.    There will be additional, unanticipated costs incurred.  And there will likely be a delay requiring additional time to perform.

 

A Type I differing site condition claim is when the contractor encounters conditions at the site different than those indicated in the contract documents.  That seems easy enough to prove, right.  Nope.  And, I mean nope!  If you don’t believe me, consider the recent decision in Meridian Engineering Co. v. U.S., 885 F.3d 1351 (Fed.Cir. 2018).

 

To prevail on a Type I DSC claim, a contractor must prove that: (1) a reasonable contractor reading the contract documents as a whole would interpret them as making a representation as to the site conditions; (2) the actual site conditions were not reasonably foreseeable to the contractor, with the information available to the particular contractor outside the contract documents (i.e., reasonable foreseeability); (3) the particular contractor in fact relied on the contract representation; and (4) the conditions differed materially from those represented and … the contractor suffered damages as a result 

 Meridian Engineering Co., 885 F.3d at 1356 (internal quotations and citation omitted).

 

In this case, the contractor entered into a contract with the government to build flood control structures.  During construction, the contractor encountered subsurface unsuitable saturated soils.  The contractor notified the government and modifications were issued as a result of the unsuitable soils.  However, the government eventually suspended the work following structural failures and then terminated the project.

 

An issue pertained to the contractor’s Type I differing site conditions claim that the subsurface unsuitable saturated soil caused delays and increased costs.  The trial court found that the existence of the subsurface saturated soils was reasonably foreseeable.  (If the site conditions were reasonably foreseeable, there is not a Type I differing site conditions claim.)

 

First, the specifications stated “[w]ater in varying quantities may be flowing in natural washes throughout the length of the project,” and “[t]he work site may be inundated because of [water] runoff.”  Meridian Engineering Co., 885 F.3d at 1357.  Based on these specifications, the court found that a reasonable contractor would interpret the specifications as a representation of water as a site condition.  Remember, the very first element in a Type I differing site conditions claim requires a reasonable contractor interpreting the contract as a whole would interpret them as making a representation about the site conditions. This kills the Type I differing site conditions claim.

 

Next, the original drawings showed the potential presence of saturated soil and the job was on a floodplain.  Based on this, a reasonable contractor would have performed a site inspection which, in turn, would have informed the contractor of the subsurface saturated soil conditions.   

 

Moreover, boring logs that accompanied the contract stated that variations may exist between boring locations.  Certain geotechnical information did indicate there would be hard unyielding material in excavation areas.  “[E]ven though the Contract indicated ‘hard unyielding material’ found at parts of the site, a reasonable and prudent contractor would not have understood the [C]ontract documents as providing an affirmative indication of the subsurface conditions to be nonsaturated at the site.  Meridian Engineering Co., 885 F.3d at 1357 (internal citations omitted).  Had the contractor undertaken a pre-bid site inspection, it reasonably would have foreseen a saturated soil condition.

 

This case demonstrates that Type I differing site conditions claims are not simple to prove. If the site conditions were reasonably foreseeable, perhaps with a pre-bid site visit, then there goes the claim.  And, presumably, the contract and accompanying geotechnical information will warrant a reasonable contractor to undertake a pre-bid site inspection (according to the Meridian court’s reasoning).  

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

 

EXCULPATORY PROVISIONS IN BUSINESS CONTRACTS

shutterstock_734837968-644x316An exculpatory provision in a contract is a provision that relieves one party from liability for damages.  It shifts the risk of an issue entirely to the other party.   Such a provision is generally drafted by the party preparing the contract that is looking to eliminate or disclaim liability associated with a particular risk, oftentimes a risk within their control.  These provisions are also known as limitation of liability provisions because they do exactly that — limit liability as to a risk.   For this reason, they can be useful provisions based on the context of certain risks, and are provisions that are included in business contracts (such as construction contracts).

 

While such clauses are disfavored, they are enforceable if they are drafted clearly, unambiguously, and unequivocally.  If they are unclear, ambiguous, or equivocal, they will construed against enforcement.  See Obsessions In Time, Inc. v. Jewelry Exchange Venture, LLP, 43 Fla.L.Weekly D1033a (Fla. 3d DCA 2018) (finding exculpatory clause in lease ambiguous and, therefore, unenforceable as to lessor looking to benefit from the exculpatory clause).   

 

Exculpatory clauses are enforceable only where and to the extent that the intention to be relieved from liability is made clear and unequivocal. The wording must be so clear and understandable that an ordinary and knowledgeable person will know what he is contracting away. A phrase in a contract is ambiguous when it is of uncertain meaning, and thus may be fairly understood in more ways than one.

Peterson v. Flare Fittings, Inc., 177 So.3d 651, 654 (Fla. 5th DCA 2015) quoting Tatman v. Space Coast Kennel Club, Inc., 27 So.3d 108, 110 (Fla. 5th DCA 2009). 

 

 

Because such clauses are disfavored and will be narrowly construed against the party who benefits from the clause, there are certainly public policy considerations that may come into play. See, e.g., Loewe v. Seagate Homes, Inc., 987 So.2d 758 (Fla. 5th DCA 2008) (exculpatory provision in agreement for purchase and construction of new home unenforceable to the extent it relieved homebuilder for an intentional tort and homebuilder could not contract around complying with building code). 

 

When negotiating a contract with an exculpatory provision in a contract, make sure you appreciate the risk associated with the clause.  The risk could be significant and outside of your control.  Make sure the provision is drafted in a clear, unequivocal. and unambiguous manner.  If you are dealing with such a provision after-the-fact, consult with counsel to best analyze arguments pertaining to the enforceability of that provision.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

RECEIVING A $0 VERDICT AND STILL BEING DEEMED THE PREVAILING PARTY FOR PURPOSES OF ATTORNEY’S FEES

shutterstock_336450779Low and behold, a party can be the prevailing party for purposes of attorney’s fees even if that party is awarded $0.  That’s right, even if the party is awarded a big fat zero, they can still be the prevailing party for purposes of being entitled to attorney’s fees.   This is because a party is the prevailing party if they prevail on the significant issues in the case.  A party can prevail on the significant issues even if that party is awarded $0. Whoa!

 

For example, in Coconut Key Homeowner’s Association, Inc. v. Gonzalez, 43 Fla.L.Weekly D1045a (Fla. 4th DCA 2018), a homeowner sued her homeowner’s association claiming the association breached its governing documents. There was a basis for fees under Florida’s homeowner’s association law (and there likely was a basis under the governing documents).  At trial, the jury held that the association breached its governing documents, but awarded the homeowner nothing ($0). The trial court also issued injunctive relief in favor of the homeowner.  The homeowner claimed she should be deemed the prevailing party for purposes of attorney’s fees; however, this was denied by the trial court  based on the $0 verdict and no fees were awarded to the homeowner.

 

On appeal, however, the Fourth District took a different stance.  The Court, relying on other Florida appellate decisions, maintained that the homeowner could be deemed the prevailing party despite receiving no monetary award:

 

While the prevailing party determination does not depend solely on the magnitude of relief Gonzalez [homeowner] obtained, she was required, at the least, to secure some relief on the merits of her claim to achieve such status. “ [P]laintiffs may be considered a ‘prevailing party’ for attorney’s fees purposes if they succeed on any significant issue in litigation which achieves some of the benefit the parties sought in bringing suit.’ ”  Although there is ongoing debate in the courts on whether a plaintiff who recovers no money damages can be a prevailing party, a party who receives affirmative judicial or equitable relief is clearly considered a prevailing party under the law. Gonzalez was indisputably a prevailing party on her injunctive claim in equity, regardless of her marginal victory on the breach count. Thus, prevailing party attorney fees should be awarded to Gonzalez in this dispute. 

Gonzalez, supra (internal citations omitted).

 

The Fourth District  justified declaring the homeowner the prevailing party because an injunction was also issued in her favor.  Hence, she did receive some benefit by bringing the suit even if she recovered no monetary damages.  However, even if the homeowner did not bring a claim for injunctive relief, it is highly likely the same result would have been reached by the Fourth District.  Since the jury found that the association breached the governing documents, the homeowner would have achieved some benefit in bringing the suit and, therefore, prevailed on the significant issues.  Gonzalez, supra (“When there is a prevailing party statute or contract, reasonable attorney fees must be awarded.”). 

 

As of now, it is uncertain how this would be reconciled with the significant issues test to determine the prevailing party in a construction lien action.  Case law has held that a court has discretion to determine no party is the prevailing party for purposes of attorney’s fees in a construction lien action.  Putting this aside, however, this holding should apply to breach of contract cases and to other potential statutory claims that afford a basis for attorney’s fees to the prevailing party. Despite a party receiving no monetary award, they may still be deemed the prevailing party for purposes of attorney’s fees if they prevail on the significant issues in the case (e.g., the jury determined the other party committed a breach). 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

UPDATE: DOES FLORIDA STATUTE s. 725.06 APPLY TO (HORIZONTAL) UTILITY CONTRACTS?

shutterstock_486800107In a prior article, I discussed a recent case that held that Florida Statute s. 725.06–the statute that governs indemnification provisions where the indemnitor is required to indemnify the indemnitee for personal injury or property damage caused wholly or partially by the indemnitee–does not apply to a horizontal, utility project as it only applies to the “construction, alteration, repair, or demolition of a building, structure, appurtenance, or appliance” per the wording of the statute.  (Please refer to the article regarding the facts of the case.)  From a logic standpoint, the case did not make a whole lot of sense as there would be restrictions on indemnification provisions for vertical projects but not a horizontal project such as underground utility improvements.  The reason this was an important issue in the case is because if s. 725.06 did govern the indemnification provision, it was not in compliance with the requirements of the statute.  If it was not in compliance, then it was not an enforceable indemnification provision.  The enforceability of an indemnification provision is a BIG deal!

 

Recently, the Fourth District substituted a new opinion, Block Builders, LLC v. Katryniok, 2018 WL 194095 (Fla. 4th DCA 2018), although I cannot say it is that helpful.  The appellate court still maintained that Florida Statute s. 725.06 did not apply to the contract at-issue since the contract involved underground utility improvements and the wording of s. 725.06 only applied to the “construction, alteration, repair, or demolition of a building, structure, appurtenance, or appliance.”  However, in this substituted opinion, the appellate court held that while s. 725.06 did not apply to the contract at-issue, this does not mean it can never apply to a utility contract.  Whatever that specifically means is unknown.     

 

Indemnification is a very importation provision in any construction contract. Very important.   It is a provision that should never be overlooked and it should be drafted with an eye towards the requirements of s. 725.06.  Parties need to understand the application of the indemnification provision, particularly in light of the liability insurance they maintain for purposes of the project.  Irrespective of this appellate court’s opinion, parties really should make sure their indemnification provision complies with s. 725.06.  Banking on the hopeful position that s. 725.06 does not govern their construction contract seems overly optimistic and quite unnecessary since a ruling that the provision is unenforceable can be damaging.  

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.