Wednesday, December 31, 2008

Contractor Groups File Suit, Seek to Block New Immigration Checks

The Federal Times reported on December 30, 2008:

"Five trade groups are suing the Homeland Security Department to block a new requirement that federal contractors check the immigration status of their employees using the department’s E-Verify system.

"In documents filed in the U.S. District Court for Maryland on Dec. 23, the groups ask the court to halt the Jan. 15 implementation of the rule and to declare the rule invalid.

"The groups say the requirement, in a June executive order, is contrary to the statute authorizing E-Verify. That law states that Homeland Security “may not require any person or other entity to participate” in the program, according to court documents.

"The case was filed by the U.S. Chamber of Commerce, Associated Builders and Contractors, the Society for Human Resource Management, the American Council on International Personnel and the HR Policy Association."

Click here for the rest of this article.

NOTE: The lawsuit cited in this article is styled as Chamber of Commerce of the United States of America et al v. Chertoff et al, Case No. 08-cv-03444-AW (U.S. District Court, District of Maryland). A copy of the Complaint is below:

This case is also discussed here in a recent post at the Federal Construction Contracting Blog, which includes additional background information.

Thursday, December 11, 2008

AGC Legal Brief Highlights Recent Builder's Trust Fund Decision, Other Michigan Decisions

The December, 2008 issue of the AGC Legal Brief highlights a number of recent court decisions and legislative changes affecting design professionals, contractors, subcontractors and residential builders in Michigan.

The current issue of the AGC Legal Brief was written by attorneys from Dickinson Wright and its construction practice group, and includes the following articles:
  • Joseph W. DeLave, Bankruptcy Court Recognizes Preclusive Effect of State Court Default Judgment Entered Under the Michigan Builder's Trust Fund Act to Bar Subcontractor from Disputing Nondischargeability of Resulting Debt [reporting on In Re Brunett, 394 B.R. 425 (Bkrtcy. E.D. Michigan, October 8, 2008)] (slip opinion here)
  • Michelle L. Alamo, Contractor Claims Against the Project Engineer Hang in the Balance after the Michigan Court of Appeals' Recent Decision in Keller Construction, Inc. v. U.P. Engineers & Architects, Inc.
  • Jeffrey M. Wesselhoff, Licensed Builders Shed Consumer Protection Claims [reporting on the Michigan Supreme Court's decision in Liss v Lewiston-Richards]
  • Leslee M. Lewis, Michigan Bolsters Residential Builder Licensing Laws including Licensing Requirements and Consumer Remedies [reporting on Public Acts 155-158 of 2007]
AGC Legal Brief is published quarterly by the AGC of Michigan and its Legal Advisory Committee. The full text of the December issue can be found here at the AGC's website.

Friday, November 21, 2008

Legally Blawged: Connecting Michigan's (Online) Legal Community

Earlier this year, I met two other Michigan attorneys who write legal blogs (blawgs). We began to meet for dinner and to share our experiences with blawgs as a way to develop and expand our practices. We call ourselves "Legally Blawged" and recently incorporated as a Michigan non-profit corporation (Legally-, Inc.) With the assistance of, one of the best legal blog development companies out there, we recently launched our website --

The three attorneys who "blawg" and form the core of this group are:
We are expanding the membership of Legally Blawged and are looking for other lawyers, paralegals and anyone else with an interest in law firm marketing to join our group. We plan to meet once a month for dinner to discuss marketing ideas that have worked and those that have not. We also plan to invite guest speakers to discuss marketing and technology ideas to help each of us improve our marketing efforts. We also intend to use these monthly meetings as a way to network. Please join us.

Friday, November 14, 2008

Statute of Limitations Bill Passed by House Judiciary Committee

On November 12, 2008, Senate Bill 865, which would revise the statute of limitations for bringing an action against an architect, professional engineer, land surveyor or construction contractor, was unanimously approved by the House Judiciary Committee. Gary Quesada testified before the Committee on behalf of AIA of Michigan, and was joined by ACEC/Michigan Executive Director Ron Brenke, and Ken Lawless, Vice President of Clark Construction and AGC of Michigan Board member, who also testified before the committee in support of the measure.

S.B. 865 was passed out of the Senate in February. This bill was discussed in an earlier post.

For more information about this issue, contact Gary Quesada at Cavanaugh & Quesada, PLC, 306 South Washington, Suite 216, Royal Oak, MI 48067, Tel: (248) 543-8320.

Tuesday, November 04, 2008

Cavanaugh & Quesada, PLC -- Announcing New Firm

Peter Cavanaugh and Gary Quesada are pleased to announce the formation of Cavanaugh & Quesada, PLC. The new firm is located in Downtown Royal Oak (MI), and will focus on serving the unique legal needs of the design and construction communities.
  • Mr. Cavanaugh's practice is concentrated on business and construction law matters, including litigation, arbitration, and mediation of contract, construction lien and payment bond claims, and disputes involving owners, contractors, subcontractors, and suppliers. Mr. Cavanaugh also represents clients who specialize in water and wastewater construction projects, especially those projects involving the Detroit Water and Sewerage Department (DWSD).
  • Mr. Quesada's practice is concentrated on representing architects, engineers, owners and contractors in business and construction law matters, including litigation and arbitration of commercial, municipal and residential construction claims, copyright and risk management consultation. Mr. Quesada also represents clients in the fields of photographic, sculptural, literary and film arts.
For more information, you may contact Peter Cavanaugh or Gary Quesada at Cavanaugh & Quesada, PLC, 1027 S. Washington Ave., Suite A, Royal Oak, MI 48067, Tel: (248) 543-8320, Fax: (248) 543-8330 or visit our website --

Saturday, October 04, 2008

New Bill Would Create "Commercial Real Estate Broker's Lien Act"

On May 14, 2008, Sen. Randy Richardville (R. Monroe) introduced S.B. 1313, which would create the "Commercial Real Estate Broker's Lien Act". The bill was reported out of committee on October 2, 2008.

The bill would do all of the following:
  • Specify circumstances under which a commercial real estate broker's lien would attach to commercial real estate.
  • Require a claim of lien to be recorded before conveyance unless the broker's commission was due in installments and at least one was due after conveyance.
  • Provide for the recording and attachment of a lien in the case of a lease agreement, a broker's acting as a buyer's agent, or a commission owed on a purchase option.
  • Specify information that would have to be included in a claim of lien.
  • Provide that a prior-recorded lien or mortgage would have priority over a commercial real estate broker's lien.
  • Require the establishment of an escrow account if a lien recorded under the proposed Act would prevent a closing transaction.
  • Authorize a person claiming a commercial real estate broker's lien to bring an action to enforce it in circuit court.
  • Allow an owner of commercial real estate to serve on a lien holder a demand to enforce the lien or answer a claim; and provide that the lien would be extinguished if the lien holder did not respond within 30 days.
  • Specify that a lien under the Act would be available only to a licensed real estate broker.
A commercial real estate broker's lien would attach to commercial real estate in favor of a real estate broker if all of the following circumstances existed:
  • The real estate broker had a written commission agreement.
  • The broker was entitled to a commission under that agreement.
  • The broker recorded a claim of lien before the actual conveyance of the commercial real estate.
To track the progress of S.B. 1313, click here

Update: S.B. 1313 died, but a similar bill was introduced on May 27, 2009, S.B. 610, that would also create a lien statute for commercial real estate brokers.  

On October 5, 2010, S.B. 610 was signed into law by Governor Granholm as PA 201 of 2010. The new law is effective immediately.

Thursday, September 25, 2008

Detroit City Council Approves Upper Rouge CSO Tunnel, DWSD Contract PC-764

The Detroit Free Press reports -- "The Detroit City Council approved today on a 6-0 vote a $314 million portion of a $1 billion tunnel system to store sewage and storm runoff during heavy rain with the city up against a Sept. 28 deadline to act or face the loss of low-interest loans [as outlined in a September 24 letter from the MDEQ] that could have cost ratepayers an extra $100 million in interest on construction bonds and put the city in violation of its water pollution permit."

Click here for the rest of the story. Read Here for more information about the Upper Rouge CSO Tunnel project. Click here for a copy of the City's NPDES pollution permit.

Wednesday, September 24, 2008

SBA Suspends Applications for Small Disadvantage Business (SDB) Program

The Small Business Administration (SBA) announced yesterday that it is suspending the receipt of applications for the Government-wide small disadvantaged business (SDB) program effective September 22, 2008. The announcement was made through the Federal Register. The SBA will continue to process all applications received before that date to completion, unless an applicant withdraws its application.

Monday, September 22, 2008

AGC Legal Brief Highlights False Claims Act

The September 2008 issue of the AGC Legal Brief highlights the use of the False Claims Act (FCA) against contractors and subcontractors. The article, written by Attorney Patrick Facca, presents an overview of the FCA and outlines some of the risks associated with the statute. Mr. Facca notes that use of the FCA has been increasing on federal projects and federally funded project. Mr. Facca also includes information about proposed legislation (HB-4773), which would create a Michigan False Claims Act.

AGC Legal Brief is published by the AGC of Michigan's Legal Advisory Committee. Click here for the full text of Mr. Facca's article.

Tuesday, September 16, 2008

Panel to Consider Arbitration Post-Hall Street Associates

On October 6, 2008, the ABA's Section on Public Contracts is sponsoring a Panel Discussion concerning the Supreme Court's ruling in Hall Street Associates v Mattel, ___ U.S. ___ (2008) and its impact on arbitration in federal procurement cases. We first reported on the Hall Street decision here.

The panel includes:
  • Donald P. Armadas, a former Judge at the ASBCA who now serves as an arbitrator and mediator;
  • Judge Paul Williams, Chairman, Armed Services Board of Contract Appeals: and,
  • Frederick J. Lees, Professor Emeritus, George Washington University School of Law.
The panel will discuss the limitations on judicial review of arbitration awards, and the ways in which arbitration can be made more time and cost efficient.

To participate in this event, or to obtain materials from the Public Contract Section website afterwards, click here.

Tuesday, September 09, 2008

New Article Outlines Laws and Programs Designed to Assist Service-Disabled Veteran-Owned Small Business in the Federal Marketplace

Korsak, "The Service-Disabled Veteran-Owned Small Business in the Federal Marketplace," The Army Lawyer, July 2008, pp. 45-58.

Written by Lieutenant Commander Theron R. Korsak, this article is meant to introduce agency heads, contracting officers, Judge Advocates, and veterans to the laws and programs designed to assist service-disabled veteran-owned small businesses (SDVOSB) in federal contracting.

The first section of the article summarizes the laws intended to assist service-disabled veteran-owned small businesses. Section two focuses on socio-economic programs and eligibility requirements. Section three is a review of common procedural issues affecting service-disabled veteran-owned businesses. Section four explores policy conflicts that may impact contract awards to a service-disabled veteran-owned small business. Section five summarizes the role that federal agencies, quasi-government organizations, and industries play to meet the 3% goal. The article concludes with recommendations to increase contract awards to service-disabled veteran-owned small businesses.

Click here for a full text copy of this article.
Note: Thanks to Jerry Walz at for the heads-up on this article. Jerry's PubKLaw-Digest is an excellent resource for those involved with federal procurement. This article is among many that Jerry includes in his "Papers of Interest" collection. Highly recommended!

Tuesday, August 26, 2008

Michigan Seller Disclosure Act (SDA): Innocent Misrepresentation Not a Claim under SDA Rules Michigan Court of Appeals

Holding that innocent misrepresentation is not a viable theory of liability under the Seller Disclosure Act (SDA) (MCL 565.951, et seq), the Michigan Court of Appeals recently reversed a judgment awarding Plaintiffs $86,813 in damages and costs and remanded the case for entry of a judgment in favor of the Defendant-Sellers. Roberts v Saffell, ___ Mich App ___ (2008) (Lawyers Weekly No. 07-67463 - 12 pages) (published opinion) (Markey, J., joined by Wilder, J.) (White, J., dissenting). On appeal from the Leelanau County Circuit Court; Rodgers, J.. Click here for the slip opinion.

In this case, Plaintiffs asserted that Defendants failed to disclose a termite infestation in the home they purchased from Defendants. Prior to trial, Plaintiffs successfully moved for dismissal of all claims, except one for innocent misrepresentation. This claim was based on Defendants' "No" answer on their Seller Disclosure Statement in response to the item "History of infestation, if any: (termites, carpenter ants, etc.)"

The Court of Appeals found nothing in the plain terms of the act requiring a transferor of property covered by the SDA "to exercise ordinary care to discover defects in the property being transferred." The act requires a transferor "to answer all items required by MCL 565.957 honestly, based on information actually known to the transferor at the time the SDS is completed." Apart from the SDS, the Legislature had not modified the rule of caveat emptor and its common law exceptions imposing liability for fraud.

A transferor cannot "be held liable for any errors, inaccuracies, or omissions in the SDS unless they were within his personal knowledge." Since liability for innocent misrepresentation can be imposed "without regard to whether the party making the representation knew it was false or was acting in good faith and because MCL 565.955(1) precludes imposition of liability on transferors who lack personal knowledge with respect to errors, inaccuracies, or omissions in an SDS, there is no liability for a disclosure made on an SDS under a theory of innocent misrepresentation."

Thursday, August 21, 2008

VA Proposes New Rules to Increase Opportunities for Service-Disabled Veteran-Owned Small Business (SDVOSB)

Veterans Administration (VA), Federal Acquisition Regulations: Supporting Veteran-Owned and Service- Disabled Veteran-Owned Small Businesses, Proposed Rules, 73 Fed. Reg. 49141, August 20, 2008.

This proposed rule would implement portions of the Veterans Benefits, Health Care, and Information Technology Act of 2006 and Executive Order 13360, Providing Opportunities for Service-Disabled Veteran Businesses to Increase Their Federal Contracting and Subcontracting. The Public Law and Executive Order authorize the Department of Veterans Affairs (VA) to establish special methods for contracting with service-disabled veteran-owned small businesses (SDVOSBs) and veteran-owned small businesses (VOSBs).

Under this proposed rule, a VA contracting officer could restrict competition in contracting for SDVOSBs or VOSBs under certain conditions. Likewise, sole source contracts with SDVOSBs or VOSBs would be permitted under certain conditions. The proposed rule would implement these special acquisition methods as a change to the VA Acquisition Regulation (VAAR).

Dates: Comments on the proposed rule should be submitted on or before October 20, 2008 to be considered in the formulation of the final rule.

Note: Thanks to Jerry Walz at for the heads-up on this announcement. For those of you who are involved in public contracting, especially federal procurement, Jerry's PubKLaw-Digest is an excellent resource. For a modest annual cost, you receive a daily newsletter updating all aspects of procurement law, and recent decisions from the various boards of contract appeals, and federal district and circuit courts. Highly recommended!

Thursday, August 14, 2008

Avoiding Home Foreclosure in Michigan

Gary Nitzkin, who blogs at Michigan Collection Law Blog, recently posted an important article outlining a number of ways that homeowners can avoid losing their homes to foreclosure.

Gary's suggestions include (a) asking your lender about a Home Retention Program, (b) talking directly with the lender's Loss Mitigation Department, (c) considering a Forbearance Agreement, a Loan Modification, deed in lieu of foreclosure or (d) negotiating a pre-foreclosure short sale. Gary notes that there may be significant tax consequences to any agreement with the lender that involves forgiveness of debt.

To read Gary Nitzkin's post in its entirety, follow this link.

Wednesday, August 13, 2008

AGC of Michigan Sponsors ConsensusDOCS Seminar

On Thursday, September 25, 2008, at 8:30 a.m., the AGC of Michigan will present ConsensusDOCS: A New United Voice for Construction Contracts at its office in Lansing. The session will run 8:30 a.m. - 11:30 a.m. and includes a continental breakfast and seminar materials. Thomas M. Keranen, Kerenan & Associates, P.C. will be the featured speaker.

A registration form for this seminar can be found here.

Sunday, July 13, 2008

New Article Discusses Interplay Between Section 523(a)(4) of Bankruptcy Code and Michigan Builder's Trust Fund Act

As discussed in an earlier post, the Michigan Builder's Trust Fund Act (MCL 570.151, et seq) may impose personal liability upon corporate officers, or members of a limited liability company, who misappropriate construction proceeds in violation of the statute. Pending legislation, such as H.B. 6176, would codify the imposition of personal liability, which is now a function of case law.

The Builder's Trust Fund Act also plays a role in bankruptcy, in which certain debts that arise when the debtor is acting in a "fiduciary capacity" may not be dischargeable. I am not a bankruptcy attorney, but Thomas R. Morris, who is an experienced bankruptcy attorney, has written an excellent article on this important topic, which appears in the latest issue of the Michigan Business Law Journal:
Pursuant to 11 USC 523(a)(4), a debt owing by an individual "for fraud or defalcation while acting in a fiduciary capacity" is not dischargeable in bankruptcy. Two United States Supreme Court cases, one from 1844 and one from 1934, establishes a definition of "fiduciary" for purposes of section 523(a)(4). However, the enactment by Congress and the state legislatures of "statutory trust" laws has created a new type of fiduciary duty not specifically addressed by the Supreme Court cases. The lower courts are not in agreement as to whether a statutory trust creates a "fiduciary capacity" for purposes of section 523(a)(4). As a result, there are a number of unanswered questions which arise under section 523(a)(4). Of particular interest to Michigan attorneys are questions relating to the dischargeability of liability under the Michigan Building Contract Fund Act (MBCFA) or "Builders Trust Fund."
Thomas R. Morris, "Trust Fund Statutes and the Discharge of 'Trustee' Debts Under Bankruptcy Code Section 523(a)(4)," 28 MI Bus LJ 11 (Spring, 2008). For the full text of this article, click here. We also reported on a previous article Mr. Morris wrote on this subject in a February, 2007 post.

Mr. Morris is a member of the West Bloomfield firm of Silverman & Morris, PLLC. Mr. Morris is a 1986 graduate of the University of Michigan Law School. Mr. Morris and his firm concentrate their practice in the areas of bankruptcy, commercial law, workouts, bankruptcy litigation and similar matters, and represents both creditors and debtors. For more information on any of these issues, contact Thomas R. Morris directly.

Friday, July 11, 2008

Materials Deduction Bill Signed by Governor Granholm, Public Act 177 of 2008

On July 9, 2008, Governor Granholm signed into law S.B. 1217 [Public Act 177 of 2008]. As discussed in an earlier post, this new law provides that construction companies can deduct materials purchased for specific construction projects from calculation of their gross receipts taxes. The deduction is retroactive to January 1, 2008.

Thursday, July 03, 2008

Defendant Lacks Standing to Challenge Plaintiff's Corporate Status, Michigan Supreme Court rules in Miller v Allstate

On July 2, 2008, the Michigan Supreme Court issued its ruling in the Miller v Allstate case, which was discussed in an earlier post.

The Supreme Court upheld the Court of Appeals' decision denying Allstate's attempt to avoid payment, but vacated the rationale. It held that only the Attorney General has the legal standing to challenge Plaintiff's corporate status. The Court made no ruling on the question of whether the service business was in fact properly incorporated. See, 481 Mich 601; 751 NW2d 463 (2008).

Wednesday, June 11, 2008

AGC of Michigan Sponsors ConsensusDOCS Seminars

AGC of Michigan is sponsoring two upcoming seminars designed to acquaint contractors with the new ConsensusDOCS contract forms, which we discussed in an earlier post last September.

  • June 18, 2008 Ramada Inn, Marquette, MI
  • June 20, 2008 EMU Livonia, Livonia, MI
For more information, follow this link.

Sunday, May 25, 2008

Sixth Circuit Affirms "Disappointed Bidder" Rule, Upholds Dismissal of Bid Protest

On May 22, 2008, the 6th Circuit Court of Appeals upheld the grant of summary disposition in favor of the City of Detroit, and against the low bidder on a DWSD project, and affirmed the "disappointed bidder" rule in Michigan.

"We reviewed the law surrounding standing and disappointed bidders in Club Italia Soccer & Sports Org., Inc. v. Charter Twp. of Shelby, 470 F.3d 286 (6th Cir. 2006). Club Italia held that absent a statutory exception, "a disappointed bidder does not have standing before this court." Id. at 293. Cases prior to Club Italia consistently refused to allow disappointed bidders to bring claims for violations of the bidding procedures. [citations omitted] A bidder who, in addition to seeing his bid rejected, is disqualified from bidding on future projects may have standing, [citations omitted] but EBI cannot obtain standing this way because EBI was not disqualified from bidding on future projects.

* * *

"United of Omaha [v. Solomon, 960 F.2d 31, 34 (6th Cir. 1992)] is particularly fatal to EBI's claims because it held that a disappointed bidder must show that "it was actually awarded the contract at any procedural stage or that local rules limited the discretion of state officials as to whom the contract should be awarded." United of Omaha, 960 F.2d at 34. EBI cannot meet this test because it was never awarded the contract and because [Detroit Mayor] Kilpatrick has unlimited discretion in awarding contracts in order to comply with the EPA consent decree. Like the bidder in United of Omaha, EBI was "obviously disadvantaged" by the government's actions, id. at 35, but it nevertheless "retained only a unilateral hope of being awarded the contract, not a right to it." Ibid. A "unilateral hope" does not create standing."

See, EBI-Detroit, Inc. v. City of Detroit, 2008 U.S. App. LEXIS 11043, *18-21 (6th Cir. Mich. 2008). The trial court's ruling was reported in an earlier post.

[Update: The official cite for this case is EBI-Detroit, Inc. v. City of Detroit, 279 Fed. Appx. 340 (6th Cir. 2008) ]

Friday, May 23, 2008

New Law Passed to Boost Set Asides for Disabled Veteran Contractors

On May 21, 2008, Michigan's Governor Granholm signed S.B. 751 into law as PA 133 of 2008. The new law takes effect immediately. As noted in an earlier post, the new law amends the Management and Budget Act to increase the goal for contract set asides for disabled veterans from 3% to 5%.

Saturday, May 17, 2008

Material Deductions Bill Voted Out of House Tax Policy Committee

AGC of Michigan reports in its May 14, 2008 Midweek Briefing that H.B. 6031, the House version of S.B. 1217, was voted out of committee following testimony by AGC Member, Patrick Cebelak, Controller for Granger Construction.

As noted in an earlier post, S.B. 1217 is designed to correct problems with the Michigan Business Tax as it affects construction contractors.

H.B. 6031 would amend the Michigan Business Tax (MBT) Act to amend the definition of "purchases from other firms" as it applies to general building contractors, heavy construction contractors, and construction special trade contractors that do not qualify for a small business credit under Section 417. For those companies, the definition would apply to "any construction materials or supplies directly purchased by the firm for a construction project." These purchases would, then, not be counted in the gross receipts tax base.

Saturday, May 10, 2008

Circuit Court Retains Jurisdiction Over $15,000 Contract Claim, Even When Lien Claim is Dismissed

Section 118(1) of the Michigan Construction Lien Act requires that an action to foreclose a construction lien be brought in the circuit court for the county where the real property is located. For smaller liens, this provision overcomes the requirement that claims in circuit court exceed $25,000. Thus, a lien claimant can pursue a foreclosure action in circuit court even where the amount in controversy is less than $25,000.

But what happens if the claim of lien is dismissed? Does this divest the circuit court of jurisdiction over the remaining claims, and require that the case be remanded to the district court? In a recent unpublished decision, the Michigan Court of Appeals considered this issue, and held in the negative. The remaining claims can proceed to trial:

"As a rule, when a court of competent jurisdiction becomes possessed of a case, its authority continues until the matter is finally and completely disposed of, and no court of co-ordinate authority is at liberty to interfere with its action."

Maidaniuc v. Country Pond, L.L.C., 2008 Mich. App. LEXIS 861 (Mich. Ct. App. Apr. 29, 2008). A copy of the slip opinion can be found here.

Thursday, May 01, 2008

How to Verify that a Payment or Performance Bond Complies with Michigan's Public Bond Statute

Michigan's public works bond statute (MCL 129.201, et seq) requires that a principal contractor furnish a payment and performance bond executed by a surety authorized to do business in Michigan. Many contracts also require that the general contractor furnish payment and performance bonds, which are executed by a surety listed on Treasury Circular 570.

If you receive a contractor's payment and performance bond, how do you know whether it complies with these requirements? How do you check on a bonding company whose name doesn't sound familiar? How you verify the financial strength of a surety?

There are 3 easy ways to verify basic information about a surety --


The State of Michigan, Office of Financial and Insurance Regulation (OFIR) maintains an online database of insurance companies that are registered to conduct business in the State of Michigan. The search interface is somewhat confusing, but if you search using the last field on the form, you should be able to find the surety you are looking for. If you don't find the surety, it means they are not registered to conduct business in Michigan. Take this finding as a red flag.

For insurance companies that are registered to conduct business in Michigan, you get the usual information about state of incorporation, and registered agent. Here's a sample report for Hartford Fire Insurance Company, a surety that is active in Michigan.

Treasury Circular 570

Treasury Circular 570 is a list of acceptable sureties on federal bonds maintained by the U.S. Department of Treasury. A surety that isn't on this list is probably very small, or one that should not be accepted or relied upon. It raises a red flag in my mind when I don't find a surety on this list.

Michigan law generally provides little recourse to potential bond claimants in the event that a contractor fails to furnish a bond, or furnishes one that fails to comply with the statute. Failure to furnish a bond that comports with the statute, however, would probably be grounds for an owner to terminate a general contract.

A.M. Best Company

A.M. Best issues financial-strength ratings measuring insurance companies’ ability to pay claims. If the contract requires that a surety bond be furnished by a surety with a particular rating (ie., AA or B+), you can verify this rating online through A.M. Best.

Update: My colleague Angie Greenslade referred me to the A. M. Best website. It provides information on the current financial strength of insurance companies, including sureties. Thanks Angie!

Thursday, April 24, 2008

DWSD Receives $316 Million Low Bid for Upper Rouge CSO Tunnel (South) Project

Earlier today, the City of Detroit Water and Sewerage Department (DWSD) received bids from two contracting teams for the Upper Rouge CSO (South) Tunnel, Contract PC-764.

A low bid of $316,170,200 was submitted by Kenny Construction/Obayashi, JV. The second bidder was Traylor Brothers/Jay Dee, JV at $352,416,600.

The North Tunnel will be bid later this year.

Read Here for more information about the Upper Rouge CSO Tunnel project.

Wednesday, April 23, 2008

Supreme Court Limits Grounds for Reviewing Arbitration Awards Under FAA

On March 25, 2008, in a 6-3 opinion, the U.S. Supreme Court ruled that Sections 10 and 11 of the Federal Arbitration Act provide the exclusive grounds for vacating or modifying an arbitration award.

Contractual arbitration agreements providing for judicial review broader than the grounds in the FAA are not unenforceable under the FAA, the Court held. Rather, when the FAA is invoked, a court "must" confirm an arbitration award unless it finds that one of the grounds set out in Sections 10 and 11 for vacating or modifying awards is applicable.

Hall Street Associates, L.L.C. v. Mattel, Inc., No. 06-989, 552 U.S. ___, 2008 WL 762537 (March 25, 2008).

Because the particular arbitration at issue was part of a U.S. District Court trial, the Supreme Court remanded the case for determination of whether the arbitration agreement, as drafted, should be enforceable not under the FAA but under the U.S. District Court's inherent authority to manage its own cases. The Supreme Court also declined to extend its holding outside the realm of the FAA, noting that its ruling did not apply to enforcement under state statutes or the common law.

Elevated Lake Level Damages -- Time for Bringing Claim is 3 Years, Michigan Court of Appeals Rules

A lawsuit brought by plaintiffs claiming that defendants flooded their property and caused trees to die by wrongfully raising the level of a lake, and seeking money damages under theories of negligence, negligence per se, nuisance, trespass, and civil conspiracy, should have dismissed under a three-year statute of limitations ruled the Michigan Court of Appeals in a recent published decision.

In Terlecki v Silver Lake Property Ass'n of Indian River, ___ Mich App ___ (2008); plaintiffs complained that defendants caused Silver Lake in Cheboygan County to rise, flooding plaintiffs’ low-lying forested property. The defendants' actions, however, occurred more than three years before the plaintiffs filed their lawsuit. The Court of Appeals concluded that "the plain text of MCL 600.5805(10) and MCL 600.5827 bar plaintiffs’ claim for money damages under any of plaintiffs’ liability theories."

Click here for the full text of the opinion.

Bill to Amend Michigan Business Tax Approved by Senate

On April 22, 2008, the Senate approved S.B. 1217 on a roll call vote of 250-38. The bill now goes to the House Committee on Tax Policy.

As noted in an earlier post, S.B. 1217 is designed to correct problems with the Michigan Business Tax as it affects construction contractors.

Monday, April 21, 2008

22 Billion Gallons!

The Atlanta Journal-Constitution reported on Sunday, April 20, 2008 that a mistake in calibrating a gauge that measures lake water resulted in the release of 22 billion gallons from Atlanta's principle source of drinking water in 2006.

"More than a year before Georgia's historic drought demanded the Atlanta area's attention, the U.S. Army Corps of Engineers accidentally released about 22 billion gallons of water downstream from Lake Lanier in 2006, while trying to save taxpayers $138."

Neighbors apparently noticed the water level dropping in Lake Lanier, but the U.S. Army Corps of Engineers didn't realize the problem due to staffing changes.

For the rest of this incredible story, Read Article.

Saturday, April 19, 2008

Michigan Construction Law, Contractor's Guide Available from AGC of Michigan

In 2005, the AGC Legal Advisory Committee published an updated "Contractor's Guide to Michigan Construction Law," which is now available on the AGC of Michigan's website in the Legal Resources section.

The Guide was written by members of the AGC Legal Advisory Committee, and is is divided into 17 Chapters --
  1. The Contract for Construction: Standard Forms and Common Risk Transferring Provisions
  2. Bids, Bidders, and Bid Protests (by Thomas Keranen and Peter Cavanaugh)
  3. Defective Plans/Specifications
  4. Contract Changes/Differing Site Conditions (by Peter Cavanaugh)
  5. Delay in Contract Performance
  6. Remedies for Payment Disputes
  7. Dispute Resolution Mechanisms
  8. Overview of State and Federal Prevailing Wage Law
  9. Michigan Occupational Safety and Health Act (MIOSHA)
  10. Hiring and Terminating Employees in Michigan
  11. Environmental Law: A Brief Overview for the Construction Contractor
  12. Bankruptcy in a Construction Setting
  13. Dealing With the Media and Press in Corporate Crisis Situations
  14. Bonding and Insurance
  15. Subcontractors, Rights and Remedies
  16. Michigan Construction Defect and Mold Litigation
  17. Information Technology and Construction Law

Bill to Amend Michigan Business Tax for Construction Firms Inches Forward

On April 17, 2008, a bill to fix the Michigan Business Tax for construction contractors moved closer to passing the Michigan Senate. S. B. 1217 was placed on order of third reading with substitute S-1.

S.B. 1217 would amend Section 113(6)(e) of the Michigan Business Tax (MBT) Act (MCL 208.1113) to include in the definition of "purchases from other firms", for certain builders and contractors, direct material costs for a construction project under a contract specific to that project.

The MBT currently imposes a modified gross receipts tax on every contractor with nexus in the State. The tax is imposed on the modified gross receipts tax base, after allocation or apportionment to the State at a rate of 0.8%. The tax base is a taxpayer's gross receipts less purchases from other firms before apportionment.
The definition of "purchases from other firms" includes payments to subcontractors for a construction project under a contract specific to that project. Under the bill, "purchases from other firms" would also include direct material costs for a construction project under a contract specific to that project. "Direct material costs" would mean the amounts paid for materials that are deductible on the taxpayer's Federal income tax return as purchases under the cost of goods sold.

To track the progress of S.B. 1217, you can follow the bill on the Michigan Legislature's website here, or contact Bart Carrigan or Damian Hill with AGC of Michigan, who are following S.B. 1217 closely on behalf of the construction community.

Friday, April 18, 2008

Mediation of Construction Disputes, AAA Updates Mediation Services

The American Arbitration Association recently updated its Mediation Services and now devotes a separate website to its mediation offerings. The new website is appropriately named

Among the changes are the following --

New Pricing Structure
  • AAA has eliminated the up-front filing fee
  • The "mediation" rate designated on the Mediator's resume is a combined rate for the AAA and the Mediator
Revised Mediator Resumes

The AAA now provides the following new information about the Mediators on its Panel:
  • Years of Practice as a Mediator
  • Total Number of Cases Mediated
  • Settlement Rates
  • Statement of Philosophy
  • Multi-Party Experience
  • All Mediator Resumes are Posted On-Line
Choice of Administration
  • Parties have the choice of filing their Mediation Cases locally (through the AAA Offices in Southfield), or at one of the Case Management Centers.
  • Parties can also file their Mediation Cases through the AAA Mediation Website.
  • Note: From my experience, the AAA's Southfield Office is much better at handling AAA matters than the Case Management Center in Rhode Island, which is the office otherwise assigned to handle mediation and arbitration cases from Michigan. Janice Holdinski and her Staff do a great job and I highly recommend that you file your Mediation Case through the Southfield Office. For more information, contact Janice Holdinski at (248) 352-5509. (pjc)

Wednesday, April 16, 2008

Contract Documents Seminar, Tom Keranen and Fred Butters to Speak on April 29, 2008

On April 29, 2008, Attorneys Thomas M. Keranen, PE, and Frederick F. Butters, FAIA, will speak about the ConsensusDOCs contract documents and the AIA 2007 Contract Documents at a seminar sponsored by AIA of Michigan.

Mr. Butters will address the substantial changes made to the AIA documents, and compare the 2007 and 1997 versions. Mr. Keranen will discuss the new ConsensusDOCS contract documents. This seminar will be held at Laurel Manor in Livonia.

For more information, contact Tom Keranen or Fred Butters at (248) 647-9653, or AIA of Michigan at (313) 965-4100 or on their website to sign up for this seminar .

Note: The introduction of the ConsensusDOCS contract documents was discussed in an earlier post.

Saturday, April 12, 2008

PDF for Legal Professionals

Adobe Acrobat (PDF) has become the de facto standard in the legal profession for filing documents electronically with federal courts using the PACER system, and increasingly state courts.

Adobe sponsors an excellent blog -- Acrobat for Legal Professionals -- that is geared for lawyers who use PDF documents in their practice, whether it be for filing documents or using PDF to manage large document collections.

One of the most useful aspects of Adobe Acrobat, which is only found in the Professional version, is the OCR function, which can turn a large scanned document into a full-text searchable one. This is particularly useful for finding specific provisions in large contract documents.

Adobe Acrobat is also a very easy way to present exhibits during trial. For my last several trials, I converted all of my exhibits, both documents and photographs, to PDF and was able to present the information with little problem. The annotation and full-screen display features of Adobe Acrobat also help to highlight and make sense of text documents.

During a recent arbitration, I used a laptop computer hooked to a 20" flat screen display to display my exhibits using PDF. I was able to keep my client's photographs in front of the arbitrator through most of the proceeding. Opposing Counsel had nothing similar to present his evidence, and conceded afterwards that the photographs had tipped the outcome of the case in favor of my client.

Friday, March 14, 2008

Department of Treasury Introduces New Lincoln

Off topic a bit, but the U.S. Department of Treasury is rolling out a new $5 bill today. The Treasury Department has a pretty cool, interactive website that shows off the new Lincoln, along with the other bills that have undergone face lifts and security enhancements in the past several years.

Sunday, February 17, 2008

AIA, NSPE and ACEC conduct Annual Design Professional Liability Insurance Survey


Professional liability insurance is increaingly critical to the successful design professional. Today’s Architect and Engineer has more choices in coverages and insurance options then ever before. Better still, those choices come at competitive prices. To assist their members in negotiating the complex and ever changing professional liability insurance market, the AIA Risk Management Committee, in collaboration with the American Council of Engineering Companies (ACEC), the National Society of Professional Engineers (NSPE), and the AIA Trust conduct an annual survey of those companies providing liability insurance coverages for the practicing design professional. Written surveys were completed by each company where standard questions are answered. The process culminated with a joint meeting in Chicago in October of 2007, where representatives from each company were interviewed to determine not only the unique and specific aspects of their particular coverages, but also to identify emerging market trends. Those findings are discussed hereafter. An overall summary of the survey results can be found on the AIA national website at

The Market in General

Market Health All of the carriers interviewed indicated that the overall market is generally healthy. The influx of capital seen in prior years has continued, which has engendered competition. Premiums are generally declining, and most carriers concentrate on retaining their current insureds. As most carriers also indicated a desire to expand their business, the expectation is that overall premiums will continue to trend downward, although no substantial drop in rates is expected. Since the design professionals have many options today, carriers are placing more emphasis on the accuracy of their underwriting and reserves.

Claims Trends Most carriers reported that the incidence of claims continues to remain relatively flat. However, the severity of claims continues to rise, albeit at a relatively small rate. When the severity of claims is adjusted for inflation, the actual rise is very small. Some areas of the market (housing and public buildings in particular) have seen a rise in both the incidence and the severity of claims. Most carriers reported an increase in claims arising out of geo-technical issues.

Carrier Health AM Best financial ratings (a leading indicator of the financial health of an insurance carrier) held steady over the past year. Those carriers who shared information concerning their profit models generally adhered to the proposition that they must generate a profit on their underwriting. In years past, some carriers had relied on investment income for profits while operating their underwriting at a loss. As certain types of risks derivative of specific types of work mature, some carriers are open about their intention to manage those risks by reducing the number of firms which perform that type of work in their book of business. Since overall market health depends on maintaining a number of healthy carriers, this business focus likely bodes well for the long term.

Developing Trends

Building Information Modeling (BIM) While building information modeling is a concern, claims exclusively derivative of the BIM project delivery system have not yet emerged. Most carriers admit that the insurance industry generally plans for the worst. In its infancy, CADD presented some of the same concerns inherent in BIM. Not only did the worst CADD fears never develop, CADD has actually made the industry much more efficient and better. The normal approach - stay at arm’s length and blame someone else - likely will not work with BIM since the A/E involvement by definition must be much more immediate. Generally, most carriers believe that the traditional issues (standard of care, scope creep, contract language, etc.) will eventually present again as the technology develops, albeit from a BIM perspective. Most carriers are already addressing the easier questions (damage from viruses, hardware and software compatibility, electronic transfer of documents, etc.) in their current policies.

Sustainability / Green Design As with BIM, claims that are exclusively derivative of sustainable design principles have not as yet materialized. However, with owners investing
heavily in sustainable features on the strength of promises that the investments will pay dividends, carriers are concerned that the claims will eventually develop if performance projections do not materialize.

Housing With the market squeeze on the hosing sectors, most carriers report an up-tick in residential claims. While the exact causes are unclear, the belief is that builders and owners are seeking to recoup losses the see from the general tightening of the residential market. Residential issues have become the principal source of claims for some carriers. As the housing market difficulties continue, claims in this sector are expected to do increase.

Cost Re-Allocation The drive to quantify the standard of care by contract is increasing. Public owners in particular are now insisting on contract clauses that allocate fault to the design professional where cost overruns exceed a specified level. Worse, the levels at which owners are seeking cost recovery has dropped to almost zero. For some carriers, the onset of this cost recovery mentality has elevated public work above condominiums (a traditional claim hotbed) as a claims generator.

Aging Infrastructure As the infrastructure ages and deteriorates it commands an increasing level of attention. The need for inspection and evaluation of those aging buildings and systems has created a new market for some firms. However, conducting an inspection may carry with it liability for conditions that were the subject of the inspection, but which were not detected.

The purpose of the survey is to provide the design professional with basic information necessary to make an informed choice from the myriad of carriers and insurance products available in today’s market. The design professional should ask;

Does my insurance broker have access to a range of carriers and products so that I can take best advantage of the choices the competitive market provides?

Am I receiving competitive premium quotes that reflect the level of competition inherent in today’s market?

Does my carrier have a loss prevention / risk management program, and, if so, does it provide me with appropriate value in exchange for the investment?

The A/E liability insurance market is more varied and dynamic than ever before. While that circumstance creates opportunity, it also demands careful attention to, and evaluation of the numerous options available such that the opportunity is fully realized.

Frederick F. Butters, FAIA, Esq. co-chairs the AIA National Risk Management committe and serves as Board of Directors liaison to the AIA Trust. For more information about this issue, contact him at Keranen & Associates, P.C., 6895 Telegraph Road, Bloomfield Hills, Michigan 48301, Tel: (248) 647-9653.

Statute of Limitations Bill Passes the Senate

On Thursday February 14, 2008, Senate Bill 865 came up for vote in the Michigan Senate. When it became apparent that a last minute effort to tie the bill to Senate Bill 445 (which would reverse recent Michigan Supreme Court decisions concerning the threshold standard for bringing suit under the Michigan no-fault insurance act) would fail, the backers of that effort withdrew and SB 865 proceeded to a vote. The bill passed with 31 votes in favor, 7 against. It now heads to the Michigan House.

Sponsored by Senator Alan Sanborn, SB 865 reverses the Michigan Supreme Court decision in Ostroth v. Warren Recengy GP Limited Partnership. The Ostroth decision upset nearly 15 years of settled jurisprudence, and had the effect of extending the statute of limitations for most claims against design professionals and construction contractors from 2 or 3 years to 6 years.

The governing statue of limitations for claims against design professionals and construction contractors is found at MCLA 600.5805. Simply put, a statute of limitations provides a time window within which a claim that has accrued must be brought, or it becomes time barred. In addition, a statute of repose is found at 600.5839(1). By contrast, pursuant to a statute of repose, if a claim has not accrued after a specified period of time, it can never accrue. Together, the two statutes create an outside limit for claims against design professionals and construction contractors.

The Court of Appeals in Witherspoon v. Guilford read those sections harmoniously such that the end result gave meaning to both statutes. The traditional statutory scheme set out in MCLA 600.5805 governed, but in no instance could the claim window run past that time specified in MCLA 600.5839(1).

That state of harmony reigned until the Ostroth decision in July of 2004. In the Ostroth case, the Court concluded that the 6 year period set out in MCLA 600.5839(1) was a period of both limitations and repose, and that controlled all claims to the exclusion of MCLA 600.5805. The net effect was a substantial increase in the statutory time limits. Since most claims accrued at completion of the construction or shortly after, the 2 or 3 year periods set out in MCLA 600.5805 usually controlled their disposition. The 6 year period of MCLA 600.5839(1) represented a marked departure from and increase in those time limits.

As yet, the effect of Ostroth has not manifested in the form of higher insurance rates. However, as we move into the extended claims period it permits, reasonable expectations suggest that will begin to occur. SB 865 would effectively reverse Ostroth and restore the statutory balance the Witherspoon court struck. As such, SB 865 is not a reduction in the statutory limitations period, but is instead simply a return to settled law pre-Ostroth.

With bi-partisan support in the Senate, SB 865 will hopefully receive favorable treatment as it moves into the House such that design professionals and construction contractors will see a return to the pre-Ostroh law, and the reasonable statutory time frames it reflects.

For more information about this issue , contact Frederick F. Butters at Keranen & Associates, P.C., 6895 Telegraph Road, Bloomfield Hills, Michigan 48301, Tel: (248) 647-9653.

Wednesday, February 13, 2008

Michigan Legislature Enacts "Owner Built Residence Transfer Act"

On Februray 13, 2008, the Michigan Legislature enacted SB 0577. The "Owner Built Residence Transfer Act" (PA 6 of 2008) is designed to protect homeowners who buy homes from unlicensed builders. The Act takes effect in 180 days.


Michigan law contains various provisions requiring a residential builder to be licensed, but this requirement does not aply to someone who is building their own home. Article 24 of the Occupational Code, however, permits an unlicensed property owner to act as a residential builder when building a home for their own use and occupancy. The exception has led to abuses by unlicensed builders, who build several homes per year "for their own use" and decide the sell them as soon as the house is completed. Effectively, such persons are acting as (unlicensed) residential builders.


The Owner Built Residence Transfer Act --
  • requires that an "owner-builder" who intends, at the onset of construction, to live in a "residential structure" either to live in it or place it for sale if he or she is unable to live there;
  • allows an owner-builder to sell only one owner-built residence per year;
  • prohibits an owner-builder who lives in a new residential structure from selling it or transferring ownership for at least 120 days;
  • requires an owner-builder, when offering a residential structure, to supply a notice that the structure was built by an owner-builder who was not a licensed builder;
  • specifies that an owner-builder who fails to comply with the disclosure requirements is liable for repair costs and the buyer's temporary shelter costs;
  • allows the buyer of an owner-builder residential structure to bring an action within 18 month for damages resulting from a violation of the disclosure requirements.
The Act includes the following definitions:
  • "Owner-builder" means an individual who is not a licensed residential builder and who builds, or acts as a general contractor for the construction of a residential structure in which that person, or a member of his or her family, actually resides or intends to occupy for his or her own use upon the issuance of an occupancy permit.
  • "Residential structure" means premises used or intended to be used for a residence purpose and related facilities appurtenant to the premises used or intended to be used as a adjunct of residential occupancy.
For more information about this issue, contact Peter Cavanaugh at Keranen & Associates, P.C., 6895 Telegraph Road, Bloomfield Hills, Michigan 48301, Tel: (248) 647-9653.

Friday, February 08, 2008

MDOT Implements New Claims Procedures

The Michigan Infrastructure & Transportation Association (MITA) reports in their current newsletter that the Michigan Department of Transportation (MDOT) has updated its claims procedures.

"On January 30th, after almost two years of collaboration and work by the Department and MITA, MDOT leadership signed into policy their new procedure for review of contractor claims. This new procedure, formally issued as Bureau of Highway Instructional Memorandum 2008-02, Review of Contractor Claims, replaces an outdated and organizationally archaic process defined in MDOT documents dating back to the mid 90’s."

For the rest of the story, follow this link.

For a copy of MDOT's January 30, 2008 Memorandum outlining their new claims procedures, following this link.

Tuesday, January 15, 2008

Supreme Court Rules Against Michigan Company on Tucker Act Challenge

On January 8, 2008, the U.S. Supreme Court ruled 7-2 that the U.S. Court of Appeals for the Federal Circuit must always consider whether cases making claims against the federal government were filed on time, even if the federal government has waived that issue.

The Court's ruling came in the case of John R. Sand & Gravel v. U.S. (06-1164), which involved a takings claim and the six-year time period for filing such claims under the Tucker Act [28 USC 2501]. This case was noted in an earlier post.

In a lawsuit filed in 1994 with the U.S. Court of Federal Claims, John R. Sand argued that the Environmental Protection Agency's restrictive activities on land for which it held a mining lease amounted to an unconstitutional taking of its leasehold rights. The Government initially asserted that the claims were untimely under the court of claims statute of limitations, but later effectively conceded that issue and won on the merits.

Although the Government did not raise timeliness on appeal, the Federal Circuit addressed the issue sua sponte, finding the action untimely where the claim first arose in 1994 and the lawsuit had been filed more than six years later. The Federal Circuit found that the six-year filing deadline was a jurisdictional limit, and not just a claims-processing limit that could be waived by the government. The U.S. Supreme Court agreed. Writing for the Majority, Justice Breyer noted that:

"Some statutes of limitations, however, seek not so much to protect a defendant's case-specific interest in timeliness as to achieve a broader system-related goal, such as facilitating the administration of claims, (citation omitted) limiting the scope of a governmental waiver of sovereign immunity, (citation omitted) or promoting judicial efficiency, (citation omitted). The Court has often read the time limits of these statutes as more absolute, say as requiring a court to decide a timeliness question despite a waiver, or as forbidding a court to consider whether certain equitable considerations warrant extending a limitations period. (citation omitted) As convenient shorthand, the Court has sometimes referred to the time limits in such statutes as “jurisdictional.” * * * This Court has long interpreted the court of claims limitations statute [Tucker Act] as setting forth this second, more absolute, kind of limitations period."

The full text of the Supreme Court's decision can be found at the Cornell Law School's Supreme Court collection here.