Articles Posted in Construction Generally

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Pillsbury’s Policyholder Pulse Law blog recently posted an interesting blog,flood2 Use Contractor’s Pollution Liability Insurance to Clean Up Potential Gaps in Your CGL Coverage by , on the importance of contractors having the right liability coverage in place in the event that a flash flood or other natural disaster causes damage that is classified by the insurer as a pollution event.

Photo:  Erich Ferdinand, Deluge, Taken Nov. 29, 2012 – Creative Commons

 

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Public development and infrastructure projects are on the rise in California. This is a good thing for the economy. InfrastructureBut it also means that private property will often be needed to complete these projects. Public agencies may acquire private property upon payment of just compensation, without the owner’s consent, through an eminent domain action. Property near highways, railroads, public utilities, government buildings and other public facilities are frequent acquisition targets for expansion of these facilities, as are those properties in the path of development of growing cities. But virtually any property may be subject to public acquisition, either through condemnation of the entire property or of easements in the property.

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Recently, my colleagues Brian Blum and Jim Chudy published an interesting piece titled Five Things about the IRS’s Proposed Regulations on the Spinoff Device and Active Business Tests discussing the IRS’ recent proposal of long-anticipated  regulations tightening the “device” and “active trade or business” tests that are necessary for a corporation to distribute a subsidiary in a tax-free spinoff under Section 355 of the Internal  Revenue Code. The proposed rules are in response to widely publicized spinoffs in which tiny businesses were matched with large minority equity interests or pools of
investment assets.

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Anyone doing international construction work knows that the U.S. Securities and Exchange Commission’s (SEC) has been continually increasing its Foreign Corrupt Practices Act (FCPA) focus on U.S. companies doing business overseas. Here’s the latest: Recently my colleagues William Sullivan, Reza Zarghamee and Fabio Leonardi wrote an interesting pieceenergy, New SEC Payment Disclosure Rules Raise FCPA Concerns for Energy Companies, on the SEC June 27, 2016 announcement that it had adopted final rules requiring public disclosure, among other things, of certain payments made to foreign governments by resource extraction issuers in connection with the commercial development of oil, gas and mineral rights. These disclosure requirements are expected to raise FCPA enforcement concerns for energy companies, as both the SEC and the U.S. Department of Justice will scrutinize this information for cause to open parallel investigations and potentially pursue issuers for alleged FCPA violations.

Photo:  Sean MacEntee, energy, Taken May 19, 2010 – Creative Commons

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This decision is reminiscent of a fairytale about a princess and her frog prince and the croaking chorus of the Frogs of Aristophane. frogOn June 30, the U.S. Court of Appeals for the Fifth Circuit issued a significant ruling involving critical habitat designations on private land. The case was decided on a 2 to 1 vote, with Judge Owen providing a strong dissent. The majority was at pains to state that “critical habitat designations do not transform private land into wildlife refuges.” Nevertheless, the extension of the Endangered Species Act (ESA) to this private land may conceivably have federal permitting consequences later if the future development of the land triggers Clean water Act considerations.

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A very interesting unclaimed property memorandum opinion was recently issued by the U.S. District Court for the District of Delaware in Temple-Inland, Inc. v. Cook, et al. After the State of Delaware conducted an audit going back 22 years and assessed Temple-Inland a liability of $2,128,834.13, which was comprised of unclaimed accounts payable and payroll, Temple-Inland filed a complaint challenging that the State’s actions violate federal common law and several constitutional provisions, including substantive due process, the takings clause, and the ex post facto clause. The District Court considered the constitutional limits to Delaware’s enforcement of its unclaimed property laws. Upon review, the District Court concluded, in part, “[t]o put the matter gently, [the State] ha[s] engaged in a game of ‘gotcha’ that shocks the conscience.”

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There are three types of bonds that afford financial protection in connection with a construction project: payment bonds, Cranesperformance bonds, and bid bonds. Below is a primer on the differences between these bonds and who is protected by them.

Construction Bonds

Construction bonds may be required by contract or by statute. Although often issued by an insurance company, these bonds are not insurance. Instead, the surety guarantees to the obligee (the entity to which the bond is issued) that the principal (the party who is supposed to perform) will meet its obligations. Most construction bonds require the principal to sign a guarantee. Thus, if an obligation is not met and the surety is required to pay a claim, the surety generally has the right to seek recovery from the principal.

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On June 3, 2016, the U.S. Court of Appeals for the DC Circuit, in Rhea Lana, Inc., et al., v. Department of Labor, reversed the district court’s holding that a warning letter sent to the plaintiff by the Wage and Hour Division of the Department of Labor (DOL) was not a “final action” for purposes of review under the Administrative Procedure Act (APA). The decision is significant because it appears to presage the use of “final agency action” as a means of seeking pre-enforcement judicial review in the federal courts for a host of governmental communications (orders, letters, formal notifications, etc.).

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Caring Hearts Personal Home Serv., Inc. v. Burwell, a U.S. Court of Appeals for the Tenth Circuit Medicare reimbursement case, describes the challenges confronting federal administrative agencies and the regulated community at a time when the demands on and the growth of government are somewhat astonishing. Judge Gorsuch begins his opinion as follows:

“Executive agencies today are permitted not only to enforce legislation but to revise and reshape it through the exercise of so-called ‘delegated’ legislative authority… The number of formal rules these agencies have issued thanks to their delegated authority has grown so exuberantly it’s hard to keep up. The Code of Federal Regulations now clocks in at over 175,000 pages. And no one seems sure how many more hundreds of thousands (or maybe millions) of pages of less formal or ‘sub-regulatory’ policy manuals, directives, and the like might be found floating around these days. For some, all this delegated legislative activity by the executive branch raises interesting questions about the separation of powers… For others, it raises troubling questions about due process and fair notice—questions like whether and how people can be fairly expected to keep pace with and conform their conduct to all of this churning and changing ‘law’… But what happens if we reach the point where even these legislating agencies don’t know what their own ‘law’ is?”

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Many construction projects are subject to the regulatory requirements of the Clean Water Act (CWA), including the supremedetermination whether an earth-moving operation is covered by a “dredge and fill” permits administered by the U.S. Army Corps of Engineers. If there is a question about the applicability of the CWA to a project, the of Corps of Engineers will determine, on its own initiative or following a request for a determination by the project sponsor, whether or not the project is subject to the CWA. However, the administrative procedures employed by the Corps of Engineers to decide whether the project is covered can often be so costly and time-consuming that the project may be abandoned. Now, in the case of the U.S. Amy Corps of Engineers v. Hawkes Co., Inc., decided May 31, the Supreme Court has acknowledged some of these costs, and the serious legal consequences that attend these proceedings, as it has ruled that in appropriate cases, a controversial jurisdictional determination by Corps officials that a project is covered by the CWA is subject to judicial review by the federal courts.

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