Articles Posted in Case Notes

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The issue of the relentless growth and penetration of administrative law remains a compelling topic for those operating in heavily regulated industries like the construction industry. Chris DeMuth, a Fellow at the Hudson Institute, recently wrote Can the Administrative State be Tamed?, an interesting essay in which Demuth provides his perspective on this topic. The administrative state has continued its inexorable growth regardless of whether the President is a Democrat or a Republican. Demuth’s essay was recently published in the Journal of Legal Analysis. It does not address last year’s King v. Burwell decision of the U.S. Supreme Court, which held that some legislation is too fundamentally important to give an agency “Chevron Deference” when it interprets the law it is implementing, but it does mention a Department of Agriculture regulation requiring magicians using rabbits in their acts to prepare and submit to the appropriate authorities a disaster response and contingency plan.

Additional Source: Complexities of Administrative State Lead to Win for Regulated Community

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Volume One of the U.S. Code Annotated publishes the Organic Laws of the United States of America, and this collection declaration-300x197begins with the Declaration of Independence. On the 4th of July, 1776, the Declaration of Independence was agreed to, engrossed on paper, signed by John Hancock as president of the Continental Congress, and the Declaration was circulated and directed to be proclaimed in each of the United States. Today, the United States is the oldest constitutional democracy, and the form of government we enjoy is still vigorous, practical, argumentative, and the envy of the world. Self- governance has always been difficult, and there is no reason to think that the future will make any fewer demands on the citizens of our Great Country than it did in the past. Happy 4th of July weekend everyone!

Photo: conservativemajority, Declaration of Independence by John Trumbull, Taken on April 26, 2010 – Creative commons

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Recent  Department of Labor (DOL) rulemaking proceedings and compliance letters have been successfully challenged in the federal courts. These cases are important because the work of the DOL, in enforcing and interpreting the law, is of fundamental importance to both employers and employees and their counsel. A few days ago, the U.S. Court of Appeals for the DC Circuit, in Rhea Lana, Inc., et al., v. Department of Labor, held that a “DOL “warning letter” was a final agency action that could be reviewed by the federal courts, and the U.S. Supreme Court, in Encino Motorcars, LLC v. Navarro, held that a Fair Labor Standards Act interpretive rule was not entitled to Chevron deference. Now, the new “persuader rule” subjecting the advice that attorneys provide employers to new reporting requirements appears to be inconsistent with the basic statutory framework according to two new rulings by federal district courts.

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In the home stretch for 2015, Courts across the nation issued environmental decisions of note:

U.S. Supreme Court

Oral argument in the case of FERC v. Electric Power Supply Association green2was held in October of 2015, and a decision may be announced shortly. The controversy involves complex provisions in the Federal Power Act (FPA) and the Federal Energy Regulatory Commission’s authority under the law to regulate the practices of wholesale electricity markets, which have traditionally been considered to be reserved for state regulation. The Court of Appeals for the District of Columbia Circuit ruled against FERC, setting the stage for this appeal to the U.S. Supreme Court. Some of the limits placed on federal regulatory authority that were discussed in the recent decision of the Court in Michigan, et al., v. EPA figure prominently in the briefs filed with the Court. Continue reading

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In Gongloff Contracting, L.L.C. v. L. Robert Kimball & Associates, Architects & Engineers, Inc., 2015 Pa. Super 149 (Pa. Super. Ct. July 8, 2015), the Superior Court of Pennsylvania reversed the trial court’s decision and held that a claim for negligent misrepresentation could be based on faulty design documents under Section 552 of the Restatement (Second) of Torts.  The case was brought by a structural steel subcontractor (Gongloff) against the architect-engineer (Kimball) for a university convocation center.  Kimball provided Gongloff and others with the design of the steel structure and repeatedly denied allegations of errors in the design.  But Gongloff alleged that the “never-before-utilized” design was in fact defective, and that Gongloff experienced various problems and significantly increased costs as a result of changes made to correct the design. Continue reading

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Florida’s Third District Court of Appeals recently held that whether “prompt” notice was given to an insurer of a claim occurring over three and a half years after a hurricane caused damages to a condominium is a question of fact that must be given to the jury. This ruling confirms that the date on which an insureds’ duty to report a claim is triggered under an insurance policy’s notice provision is an issue of fact not ripe for summary judgment. The case is Laquer v. Citizens Property Insurance Corporation.
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A unanimous panel of the Illinois Appellate Court recently held that three insurers have a duty to defend any case in which the bare underlying allegations – if proved – would render their insured liable, regardless of extrinsic facts. This sweeping ruling confirms that the duty to defend is a form of “litigation insurance,” protecting the insured against the costs of being wrongly sued, however groundless the claims against it may be. The case is Illinois Tool Works Inc. and ITW Finishing LLC v. Travelers Casualty and Surety Company, et al.
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On December 9, 2014, the U.S. Civilian Board of Contract Appeals (“CBCA”) decided Kiewit-Turner, a Joint Venture v. Department of Veterans Affairs, in which general contractor Kiewit-Turner (“KT”) scored a major victory against the Department of Veterans Affairs (“VA”). The CBCA ruled that a change order required the VA to deliver a design that could be built for costs that were capped at a specified amount — shifting risk to the owner from the contractor.
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Recently, the National Labor Relations Board (NLRB), in a 3-2 decision, in Purple Communications, Inc. and Communications Workers of America, AFL-CIO. Cases 21-CA-095151, 21-RC-091531, and 21-RC-091584, considered the right of employees under Section 7 of the National Labor Relations Act (Act) to effectively communicate with one another at work regarding self-organization and other terms and conditions of employment. Ruling on this question, the NLRB concluded that “employee use of email for statutorily protected communications on nonworking time must presumptively be permitted by employers who have chosen to give employees access to their email systems.” In doing so, it overruled the NLRB’s divided 2007 decision in Register Guard, 351 NLRB 1110 (2007), to the extent it holds that employees can have no statutory right to use their employer’s email systems for Section 7 purposes because its “analysis fails ‘to adapt the Act to changing patterns of industrial life'”; the NLRB majority in Register Guard accepted the employer’s contentions there that an email system is analogous to employer-owned equipment and that prior cases had established that employers could broadly prohibit nonwork use of such equipment. It further found it appropriate “to apply our new policy retroactively.
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New Jersey’s Appellate Division recently reversed a trial court’s dismissal of a general contractor’s claim against a performance bond, holding that the bond must cover the general contractor as the intended obligee, even though the general contractor was not expressly named in the bond.

In Allied Building Products Corp. v. J. Strober & Sons, LLC, et al., A-1113-12T4 (NJ App. Div., September 5, 2014), Dobco, Inc. (“Dobco”) was the general contractor for a science hall renovation project at William Paterson University. J. Strober & Sons, LLC (“Strober”) bid for and was awarded a roofing subcontract on the project. The subcontract between Dobco and Strober required Strober to obtain payment and performance bonds, in the form annexed to the Dobco-Strober subcontract (which required that Strober be named obligee on the bonds).

Strober was awarded the subcontract with Dobco, but in accordance with the company’s procedure, Colonial did not review the actual subcontract. Nevertheless, an underwriter approved issuance of the performance bond, and Strober paid for the bond.

However, when the performance bond was issued, it named William Paterson University as the obligee, rather than Dobco. Dobco advised Strober that it rejected the bond, because it was required to name Dobco as obligee. As a result, Strober issued payment and performance bonds naming Dobco as obligee, using a power of attorney and Colonial’s seal. Colonial asserted that the bonds were a nullity, because Strober was only authorized to issue bid bonds using Colonial’s seal and power of attorney, in accordance with its “partnership account.” Nevertheless, Dobco rejected these bonds as well, and demanded that Colonial issue the bonds with various documents that ordinarily accompany payment and performance bonds. Strobco did not procure the bonds, but nevertheless began its work on the project.

During the project, Dobco became concerned with Strober’s performance, and requested the bonds that had not been delivered. Strober repeatedly contacted Colonial, but was advised several times that the bonds were “still in underwriting,” even though Colonial had already accepted the premium. Eventually, Dobco terminated Strober, and Strober filed for bankruptcy protection. Dobco filed a claim against the bond, but it was denied because Dobco had rejected both sets of bonds, and Colonial maintained, therefore, that they were not in effect.

On cross-motions for summary judgment, the trial court dismissed Dobco’s claim against the bond, citing established New Jersey law that a surety is “chargeable only according to the strict terms of its undertaking and its obligation cannot and should not be extended either by implication or by construction beyond the confines of its contract.” Since Dobco rejected both bonds, the trial court found that there was no valid contract between Colonial and Dobco.

The Appellate Division reversed, noting that, when a bond incorporates a contract by reference, the bond and the contract must be considered as one integrated document in ascertaining the meaning of the bond’s provisions. The Appellate Division held that “strict construction” should have only applied after the extent of the surety’s undertaking was determined; it should not have been used to interpret the language creating the surety’s obligations under the bond. Thus, the Court held that the bond was intended to secure Strober’s contractual obligation to Dobco, which required Strober to obtain a performance bond, naming Dobco as obligee. In so holding, the Court stated, “[W]hen Colonial agreed to bond [Strober’s] performance, it undertook the obligation to do so in the form required by the contract. That Colonial chose not to review the contract it bonded cannot relieve it of obligations voluntarily undertaken.” The Court was unmoved by Colonial’s argument that Dobco rejected both bonds, and ordered the bond reformed, consistent with the Dobco-Strober subcontract.